- Monday.com, co-founded by two product-focused entrepreneurs in 2012, offers a cloud-based work management platform designed for flexibility and ease of use. Unlike many competitors, their platform is tailored for non-technical industries, with 70% of their users from sectors like construction, real estate, and manufacturing.
- Eliran Glazer emphasized how this diversity has been central to their growth, helping them reach over 225,000 customers across 200 industries without over-reliance on any single sector. This approach has been a key differentiator in a crowded market.
- Eliran Glazer, who joined Monday.com just four months before their IPO, played a crucial role in their successful transition to a public company. His background in maintaining financial discipline has been instrumental in their journey.
- Under his leadership, Monday.com’s free cash flow margin skyrocketed from -25% in 2020 to 41% in Q1 2024. Glazer attributes this to their strategic investments in performance marketing, a disciplined approach to spending, and a strong focus on customer retention. He highlighted that the company plans to utilize their robust cash flow for potential stock buybacks, reflecting confidence in their long-term growth prospects.
- Glazer highlighted the company’s commitment to integrating AI to enhance their platform's functionality, particularly for non-technical users. AI-driven automation tools, such as automated email allocation and workflow generation, make the platform more accessible and efficient.
- Looking forward, Monday.com plans to introduce more AI capabilities and consider consumption-based pricing models for these features. This innovation aligns with their broader goal of continually improving their product to meet diverse customer needs, ensuring that even industries with less tech-savvy users can leverage the full potential of their platform.
- Glazer shared insights into Monday.com's future growth strategies, including expanding their market share through both organic growth and potential acquisitions. They aim to strengthen their platform and introduce new products like Monday Service, which caters to customer service needs.
- On their investor relations (IR) strategy, Glazer emphasized the importance of transparency and long-term relationship building with investors. He mentioned that transitioning from a VC-backed company to a public company required a shift in how they communicated with investors, ensuring clarity and trust. Additionally, Monday.com has successfully diversified its shareholder base, moving away from VC dominance.
- Glazer’s strategic vision includes not only expanding globally but also fostering a culture of innovation within the company. He drew inspiration from companies like ServiceNow and emphasized the importance of continuous investment in people and technology to maintain a competitive edge.
Katie Perry (00:00):
I'm Katie Perry, and this is After Earnings, the show that brings you the retail investor up close and personal with the people building the businesses that you care about.
Austin Hankwitz (00:08):
And today we caught up with Elron Glazer, the CFO of monday.com, a cloud-based platform that helps businesses create flexible low and no code tools for managing workflow. CRM and DevOps. They were founded in 2012 and went public during the IPO craze of 2021, but their trajectory couldn't be more different than a lot of the IPOs that went out that year that have since struggled tremendously. And
Katie Perry (00:34):
The business is growing fast. They are approaching a billion in revenue with 26% free cashflow margins. And a lot of this business is coming from non-technical industries, which is super unique in the SaaS space. A lot of people usually build for technical audiences first. They've got churches, they've got real estate people, they got manufacturing. That's key to their strategy.
Austin Hankwitz (00:54):
Elron walked us through how they balance hiring during macroeconomic uncertainty, his thought process when they went out and bought a Super Bowl ad, how they plan to allocate their billion in free cashflow over the coming years and where monday.com plans to expand toward in the near future. So with that being said, let's jump into this awesome interview.
Katie Perry (01:14):
Aron, welcome to the show. So awesome to have you here. Tell us about monday.com. I know a lot of people have a perception of the company, especially here in New York. You guys do a lot of advertising. It seems like there's a perception that you guys do one thing, maybe it's project management, but it seems much larger than that. So zooming out what is monday.com, how do you guys differentiate across some of these other platforms that might have similar external positioning?
Eliran Glazer (01:44):
Sure. So first of all, ting Katie, thank you for having me. I'm really excited to be here. So I will tell a bit about Monday. So Monday is a cloud software company, a work management platform that runs all core aspects of work within any organization. So the way to think about it is for every organization out there, every business, no matter what industry, no matter what size we digitize and automate their workflows. So if employees are coming to work, they have multiple tasks every single day, we help them make it better, faster, more efficient, it increases productivity and it's actually, it's also contributes to collaboration. And we are a collaboration software as well. So the story of Monday, maybe to give some context with regards to how Monday founded and started, I think it's interesting. So Monday was founded in 2012 by two entrepreneurs, co-founders and co-CEOs, brilliant entrepreneurs, Wayman and Ziman.
(02:46)
And the reason why they founded Monday, and this is part of how we are different from other names in the industry, is they were developers and product experts and they always felt like the software that they're using, they have to adjust themselves in order to use the software because the software that was sold to them was rigid and limit their ability to use it. So they decided to develop Monday as an open platform to democratize the power of software as they like to call it, in which rather than you have to adjust yourself to the software you're using, the software will adjust itself to you as a user. So the idea was that let's build an open platform with unique architecture and we build a building blocks, it's a low-code, no-code platform that is comprised of building blocks. Now, to give you an example, if I give you a Lego bricks kind of a box of Lego bricks, you can build anything you deem appropriate or anything you want with these bricks. This is how Monday is built and why it's important because 70% of our customers are non-tech. These are not techy people. They don't know how to code. So they use Monday through the drag and drop capabilities through the building blocks and they build any software or any solution that is fit for their needs. And this is something that is very unique and it helped us kind of expand in a very significant way. We have more than 225,000 customers today across 200 industries with no industry that is more than 1% for total a RL.
(04:21)
We are operating in more than 200 countries and territories and servicing three segments. The SMBs and mid-market still the most significant part of our A RL and enterprise. And we're growing significantly with enterprise. We define enterprise customers as a customer above $50,000 in a RL. And the rate we're growing in enterprise customers is faster than the entire growth of the business. So I think all of the above is helping us to continue to be successful in our expansion within existing customer base, but also getting a lot of new top of funnel new customers that are coming to us and having a journey with us even starting as SMBs, but they continue to grow through expansion and grow the business from maybe tens of seats into thousands of seats. And the uniqueness of the platform, the fact that we're servicing all segments, all businesses, the fact that we're having this building block capabilities with an open platform is something that contributes to, contributes, sorry to the success of mandate.
Katie Perry (05:31):
I'm so glad you brought up the non-technical audience piece. I think that's been a big trend that you guys were early to is low-code, no-code platforms. And it's interesting, I'm in New York City, I work in Tech Monday, has a lot of adoption in tech, but you guys have lots of strength outside of tech. And so it's interesting to hear that from you getting outside of your bubble as a retail investor, someone who's working in an industry understanding the larger implications, what are some of the more interesting customer profiles or applications that might surprise people, types of businesses that are using monday.com?
Eliran Glazer (06:11):
Sure. So as I said, 70% are non-tech as you said as well. So think about construction, think about airplanes manufacturing, think about hotel chain management. We are actually servicing all of these industries because they're using Monday boards and dashboards and they're building the solution that is the right fit for their needs. So when you think about Monday, immediately you think about the tech company. So potentially we're only servicing technology companies, but actually the more interesting cases are companies that are basically out of the tech industry. So we run campaigns for marketing employees, they run campaigns, they look at the return on investment through boards and dashboard. We do CRM for sales team in organizations, looking at leads, looking at pipeline, looking at conversion to revenue. We are doing things that run a resource allocations across organization that would like to manage tasks and projects within each kind of organization.
(07:18)
Worth mentioning that on the platform of Monday we have Multiproduct. We are a multi-product company. So we have the vertical of work management that usually would be the project management Thelike or the Smartsheet. Like we have CRM that we developed a year and a half ago and is servicing the CRM industry. And we have Monday, sorry, we have Monday Dev, which is similar to Jira, the solution of Atlassian to service the developers. But what unique about Monday is when you think about development, we think about, we call it builders, there are developers, there are designers, and there are product people who work together. And our solution allows them to work in collaboration through a connective tissue. So this is something that helps them also to do things that are not pure development, but adding also value to product and designers. So basically every business out there, there is no limit to what companies can do with us and they take the system to its limits.
Austin Hankwitz (08:21):
That's powerful. And you mentioned now that these 70% of customers are those non-tech customers appetite for artificial intelligence. I feel like everyone's talking about how AI is revolutionary and how it's just completely revamping their product suite. But if these manufacturing or construction, are they wanting ai? How are they looking at AI from Monday dot com's perspective?
Eliran Glazer (08:47):
Yeah, it's a great question. So maybe let's start with some context. I remember Q1 of last year, I would say more than 60 of the questions were about ai, how you are going to use ai, how you are going to monetize ai. So let's remember that Monday to begin with. And by the way, a year later, much less questions to be fair. I got this year mostly around monetization and whenever you're going to monetize it, but maybe you see Nvidia and the other kind of the infrastructure and these are the companies that start hardware and infrastructure. These are the companies that see immediate value. And for other companies, I think it's still early days, but we are in the business of digitizing and automating. So for companies who basically coming from processes that were not digitized or were not automated, and this was accelerated post covid, we helped them to automate processes.
(09:40)
So for example, you are a company that is doing manufacturing and you would like to build a board and a dashboard of Monday that allows you to manage your projects using ai. What you can do is basically we have an AI assistant, you can define in the workflow what you want to build, what is the industry, how many people you have, what are the tasks that you want to manage? And the system will generate a board in the dashboard to you. This is going to be much faster than what you used to do in the past. You don't have to build it from scratch, you can do formula builder, you can define all kind of things. This is one thing, a second thing, for example, you can automate processes within the workflow itself. So I will give an example. You are running a sales organization in a certain organization and you get a lot of emails inbound that you get the email and then you need to send the email to the right person who is dealing with this account and you have to send it to the right person will have to kind of put it in the right bucket.
(10:48)
What is the lead, what is the size of the lead? So we use AI that actually automate all of this process. You get the email, the system itself is browsing through the email, it's allocating it to the right person who is allocating it to the right kind of lead group or the right sales team. And all of this is being automated rather than someone have to click the button and send it, you have multiple clicks. You do it through an automated process with AI capabilities.
Austin Hankwitz (11:17):
So it's sort of happening behind the scenes where these non-tech customers don't have to feel like they need to be experts in AI to be able to use the AI capabilities that monday.com offers.
Eliran Glazer (11:29):
Correct. And this is again going back to the fact that because it's such an easy to use software because of the fact that it's, you don't have to know how to code. So all of the above together with the AI capabilities that are mostly around automation and assistant, this is something that increase the ease of use and kind of the productivity of the employees.
Katie Perry (11:53):
Let's shift to growth, and I know we're going to get into the nitty gritty of the growth from last quarter, but at a higher level, I'm curious your view as a CFO. It sounds like this company started in a very scrappy way. So raising venture capital during a time when it wasn't so abundant and really it sounds like the founders needed to be very buttoned up in their financials and profitability strategy. You must love that as a CFO. And so as you think about growth going forward, can you talk a little bit about the mindset of the company when it comes to headcount additions and how to balance growth with sort this efficient business that you guys have so successfully built over the past few years?
Eliran Glazer (12:39):
Sure. So actually when we kind of thought about the Monday journey, there is, if you remember often, and Katie few years ago, just a few years ago, everybody was speaking about growth at total cost. So I don't care about bottom line, I don't care about anything, just give me incrementally about, this was kind of the thing that just before with micro economy becoming more challenging, obviously it changed a bit, but this was kind of the buzzword growth at total cost. And we from day one were looking at sustainable costs or sustainable growth actually, sorry, sustainable growth, which means we care about the growth of the RR, but we're also disciplined in a way that we want to see the return on investment in the way we manage business. So five years ago or maybe six years ago, back in 2018 until then, we were mostly a performance marketing company.
(13:31)
So basically what it means is we spend online marketing, we did all these very cool campaigns and ads in all kinds of places and it brought the top of funnel traffic to the Monday platform. And basically all of these customers, many of them became customers and we were very successful on that. The reason why we were able to do it is we have a system, internal system called Big Brain. Big Brain is looking at every dollar that we are spending and measuring the return on investment. And we were able to optimize it in a way that if we didn't see the return meeting certain criteria that we defined, we wouldn't spend the money. And back in 2018 we started to build a sales organization. So from a PLG company that was only doing performance marketing, we actually built a sales organization. And today we have close to 2000 employees, more than thousand employees in Monday are customer facing.
(14:28)
These are salespeople, partners and customer success managers as well as the marketing team. So what helped us to your question Katie, to kind of continue to grow the business is basically we did a shift in the business model from a single model of performance marketing. We build a hybrid model that actually took the lead from top of funnel and actually converted them into the sales organization. So we started to see expansion within existing customer base. We have thousand use cases that the customers are using us. And at the same time we did the journey from a single product company into a multi-product company. And we have the platform, we have a platform enhancement thing that we're doing is called Monday db, which actually help us to gain more speed, scale and performance within the platform. So we kind of worked in three kind of directions. One is build the sales organization, second is we enhanced the platform. Third, we developed additional products on top of the platform. All of these things help us to expand within existing customer base to get new leads and basically to grow the business while we are looking at the bottom line as well. And that is why we achieved sustainable growth, improving top line, but also getting a very good efficiency in bottom line in free cash flow.
Austin Hankwitz (15:49):
I love that breakdown and we're going to get into the free cash flow here in a second, but I'm curious, how do you balance adding more sales people, adding more r and d people while also sort of being cognizant of these lingering macro economic uncertainties as you all stated in your earnings call?
Eliran Glazer (16:08):
Sure. So what we do is first of all, we are doing the long-term plans and one of the things we presented back in December 6th in New York, we did the investor day, the first investor day ever. And where we're looking at the business and we built kind of the business plan, we're looking at the next three years and we kind of define what would be the strategy for us in three years and then where we want to be. And then we go backward. We say, okay, in order to be where we want to be, what we need to do today, what are the limitations that we have in order to achieve this, but what are the drivers that we can invest in order to bring these KPIs? And as a general truth, a company doesn't innovate will die or will be behind. So you have to innovate.
(16:57)
And one of the interviews that you did or the podcast was with the CFO of ServiceNow. And this is a company for me, it's a north star. This is an amazing company, the way they build the business. She mentioned they have more than 10 businesses with verticals actually with more than 250 million in revenue, which each one of them is a company. And the way we think about our business, if you think about ServiceNow, we build and we invest today even in the price of not improving bottom line the way we did until now, but we understand that we have to build kind of the growth engines for the future. So we define what will be the growth rate we defined, what would be the return on investment and what would be kind of trickling to the bottom line. So we had a very strong journey over the three years we're profitable and the free cashflow just in Q1 was 41% and we'll get to that.
(17:56)
But the way we think about the business is continue to invest as long as we meet the return criteria. So innovation hiring, we know that if you don't hire people eventually you will hit the wall. So we kind of balance between road rates, which we said even in the investor day that we believe that it's going to be high twenties, low thirties in the next few years. But also we kind of addressed what would be the impact on the bottom line. And we are always looking at the impact on next year, the next two years growth and bottom line. And we manage this in a way that is proactive. So maybe just to give an example last thing because this is important. Two years ago when macro changed and it became more challenging, we said, okay guys, let's look at all the plans that we have.
(18:45)
Let's see if we can do something in order to mitigate some of the risks. So we kind of slowed down hiring, you cannot be reactive, you have to be proactive. And this is why we have scenarios and we run these scenarios, as I said, having long time plans and this is the way we kind of manage the business. But in addition to that, because of our performance marketing engine that can be easily modified due to our kind of return measurements. We know how to either eat the brake or pull forward or continue to invest in case we see changing macro environment conditions. So this is the way we manage it and for me it's actually I'm not looking to optimize cost at any cost. I'm looking to optimize the business, continue to drive growth and continue to improve efficiency. So because there is always this story about the C FFO being the party pooper, someone come to you with this sexy idea, I have this crazy idea, you have to hear about it, you just need to give me $10 million and this is going to be amazing. So if it makes sense from a business perspective, yeah, let's try. It's not just no, please don't do it. We are looking at these things and Roan, the co-founders and CO CEO are kind of very creative. So we have this kind of culture of measuring and looking at things and making decisions to invest or not.
Katie Perry (20:14):
Anne, I'm curious, how is the conversation when someone pitched you the Super Bowl ad? I know you guys are very buttoned up on attribution and notoriously Super Bowl ads, who knows? Was that a tough sell to you or was that a moment where you kind of did a little calculation, you're like, let's take a shot on goal here?
Eliran Glazer (20:40):
It's an interesting question, Katie. So I would be honest, I said it on calls before, I'm not a big of these Super Bowl adss. Few companies did it and I thought, look, the CRO came to me and said, look, I want to do this Ed because during the transition of Monday from a performance marketing company into a sales led organization as well, we want to make sure that we also get to the heart and the mind of people. And if you think about America, I lived four years in New York between 2006 to 2010 and before I moved with my family, someone said, before you move to New York, you have to know about sport. So I recommend you to read about baseball, football, basketball, hall of fame, all of these things, otherwise you will not be able to develop a conversation. Now it's an anecdote, but the CRO told me, look, we have to be there in front of the viewers, in front of the people who are watching the Super Bowl because they need to learn about Monday. So let's try and you know what, we can find ways to kind of fund it. If we are looking at the performance marketing budgets, online marketing, let's fund it with this. I think it was it worth the shot one time? I said, look for me, let's do it to a certain extent, but I don't want to repeat it because I think in our line of business one time is okay, I don't want to repeat it. So it was an interesting experiment.
Katie Perry (22:03):
Love it.
Austin Hankwitz (22:05):
That's so awesome. Well let's jump into the earnings results. I'm curious, you guys raised your guidance to about this 950 million range for the year now of 2024. So what are some of the key drivers behind Monday dot com's recent revenue growth as stated in your earnings call for Q1 and then how do you plan to sustain this momentum throughout the rest of the year?
Eliran Glazer (22:26):
Sure. So there were a few drivers to the increasing guidance. One was the price adjustment. So this year for the first time in the life of Monday, we did the price adjustment to the existing customer base. Now we finished and we said last year that when we did the investor day that we will finish this year with 2023, sorry, with 835 million in a LR. So imagine that, and this is across three segments. So when we said we're going to do price increase, we said we're going to do it on a stage kind of in waves. It'll take few years probably to complete it, but we believe that some of the upside will come from this price adjustment. And the reason why we did it, and it's important is we wanted to tie value to the price. So many companies, they have a process of a price increase and we never did it and we brought tons of value to the platform over the last few years from product from features and functionalities and AI and other additional kind of capabilities that the platform was we invested in.
(23:34)
So it was actually, we got relatively good reactions. We didn't see the churn that we have anticipated because we did the first time there were uncertainties. So this contributed to some of our confidence. The second thing is that we had a strong performance in Q1 from our existing customer base. I think I was in Boston two weeks ago in a JP Morgan conference and many of the questions were about SMBs and many investors and analyst actually said, guys, your SMB business is doing well and we get a lot of reaction from the market that SMB is challenging, so what is your secret sauce? And I said, look, it's the same playbook that Mano was doing. We invest in performance marketing and looking at their return, this is the big ring capabilities. And well actually some of our competitors pulled back, we actually invested more because we knew how to analyze it, we knew how to optimize it.
(24:30)
So top of funnel remained very strong. Gross retention remained stable and actually reached all time high. And the fact that we did the price adjustment, the combination of top of funnel strength in mid-market and SMBs, the fact that we did price adjustment and the fact that we continue to expand within the enterprise customers provided us with confident that we can increase the number. We actually increased the number more than we increased the guidance in q1. So I believe we beaten around 6 million, but we increased the guidance in 18. So this was a very positive kind of thing for us.
Katie Perry (25:12):
Real quick for our listeners on the call, I know many people are familiar with SAS, subscription based, you guys priced on a seat basis. Is it purely per seat or are there usage factors that can come in and make it a more hybrid pricing model? Can you just break down how your pricing works, what that looks like now and what it could look like in the future?
Eliran Glazer (25:36):
Sure. So I would say more than probably 99% of our business is seed based and this is the current model. But as we continue to evolve the platform and to add additional capabilities and functionalities, there is now add-ons that we sell to our customers. They can be premium support, they can be a product that called Canvas, which is similar to Miro if you know what it is. It's like you basically it's a white whiteboard that actually is now being automated online and all of these things managed services also another add-on this is priced in a different way because you cannot price it by seat. So you actually take a certain percentage of the total deal based on the segment. If it's enterprise, if it's basic, usually it'll be with the big customers. So this is based on the sale of the add-ons. In the future it might be that we are going to consider a consumption model for some of the services when we add, for example, so you asked about AI earlier.
(26:47)
AI I think is going to be augmented to our solutions. So it's already being augmented because we're a productivity platform because we provide automation and digitization. AI capabilities are going to be augmented. So potentially there can be a price that's related to AI in the future. And it's important to mention that our team now, we didn't bake any AI price into our guidance, but in the future we might do it based on consumption based. So the number of automations, the usage, so you sell it by buckets or you sell it as a one-time extra fee. But currently to be completely transparent on that, it's 99% seat based.
Austin Hankwitz (27:32):
That makes a ton of sense. Want to jump into some free cashflow questions. Your free cashflow margin has gone from 24% in Q1 of 2023 to 41%. During this most recent quarter. You went from negative 25% margin in 2020 to then positive 28% in 2023. You guys just completely are printing cash for your shareholders. How are you doing this? How are you expanding your margins so eloquently?
Eliran Glazer (28:00):
Yeah, so the 41% is definitely something very unique. So I think the model of Monday, and also it relates to the fact that we basically have an increasing number of customers as well as increasing a RR base. So what's basically happening is that in terms of subscribers, we have 80% of our subscribers, which are annual subscribers. They pay upfront and 20% are monthly. So you get upfront 80% upon renewal, you get upfront all the payment for your 12 month a RL contract. The second thing is in terms of investment, once you already have the customer, you don't have to invest additional other than the salaries that you pay to the salespeople who are actually the account managers. There is no cold calls or additional investment that you have to do in order to bring the customer some of it as part of cac. So basically you get the payment of the customers and it contributes to your efficiency of the model.
(29:02)
We hardly see bad debts. There is almost, I don't think very, very little kind of customers that didn't pay very, very rare. And we're also disciplined. The company we're now with 2000 employees getting closer to a billion dollar in error and we said that we are going to be a billion dollar in error in Q3, we invest in people obviously we'll get to that, but this is the number one obviously important thing for us as part of growing the business. But we are not hiring in advance. We don't have tons of people. There is the right balance. So the combination of performance, strong performance, top line and discipline kind of cost management with the efficiency of the model, I believe contributes to the fact that we're generating cash. We have $1.2 billion more than 1.2 billion at the end of Q1. And we said in the investor date that between 2023 until 2026, we're going to generate additional billion dollar. So 250 million a year in free cashflow if you may.
Austin Hankwitz (30:13):
So is that sort of the margin that sort of analysts and retail investors should be thinking about as it relates to your free cash flow, let call it twenty five, twenty 6% on revenue?
Eliran Glazer (30:24):
Yeah. Austin, something like that.
Austin Hankwitz (30:27):
20 25, 20 26. Do you expect that to rise at all here in the coming years?
Eliran Glazer (30:32):
I think that in the next few years we have a huge opportunity in front of us because the time is huge and not like three years ago when we went public and people say Monday, just another company who is doing the asanas and the Smartsheet and the clickup three years later. I think we're well positioned. We are unique because of the platform capabilities and the unique architecture. So for us, I believe that although I'm A CFO, we need now to invest even in the price of maybe getting, and we said that in the investor day, the increase in free cashflow and profitability will not be as dramatic as we saw until now. I think we have to capture this opportunity, we need to increase market share, we need to make sure that we continue to strengthen our position, we need to expand globally. And I think this is the number one focus for us, the number one area of focus for us in the next two, three years and this will continue to drive our business going forward.
Austin Hankwitz (31:33):
And do you have any big crazy plans beyond just obviously hiring salespeople and some r and d as to how you want to spend some of this several hundred million dollars of cashflow over the next coming years?
Eliran Glazer (31:46):
Sure. So three areas that we kind of mentioned. One is that we will continue to invest in the business and hiring people, investing in the platform, investing in the product. You win by product, you win with people, you're only as good as your people are. So we have to have the best people out there. The second thing is that we hired, we are building the corp dev kind of division in order to build the muscle and to start looking at non-organic road until now everything was organic. So in the next 12 to 18 months, I would like to hope that we're going to look at m and a targets and potentially do some acquisition. It's going to be more tech technology, producting, not revenue or customers. And the third thing, which is a longer term, if we will have, sorry enough cash, we might do a buyback of shares, but this is down the road. I think that you have to let your cash balance work. You don't want just to increase it without having it invested in the business or in return to shareholders.
Austin Hankwitz (32:54):
You heard it here first. Ladies and gentlemen, if you want to build a cool tech startup and sell it to monday.com, now's your time.
Katie Perry (33:03):
Arian. On that note, can you tell us any specific capabilities or gaps that specifically you'd be looking to in the event of something like an acquihire or an acquisition? Are there general realms or spaces that you could let us know are of interest?
Eliran Glazer (33:23):
Sure. So if you think about the products of Monday, there is always the question of depth versus breadth. So as I mentioned until now we have three main product lines which are the work management CRM and Monday dev. And we announced that we are going to do Monday service, which is tickets. And this relates to tickets and customer service. And this has a lot of demand in the market and in any of the products line we would like to increase the depth of the product itself to add capabilities. So for example in CRM email composing and marketing activities that related to the CRM products in work management, potentially workflows that we don't have in service, we're just getting started, but potentially technology that will help us to handle tickets that are coming from customers or IT tickets internally. So I would say it's a complimentary technology features and functionalities that will kind of be integrated to the existing product of Monday but also can be on the platform.
(34:39)
And one of the challenges, and this is I did a lot of research with regards to acquisitions before we kind of established or the division and there were kind of different opinions and I heard many who said if you're growing above 30% a year or even above 20% doing an m and a, it's not the kind of the default because then you might be defocused and usually you would do it. I think we should do it in any case now and build the muscle and look at the things that potentially we can shorten the time to market, but it's going to be complimentary to the existing products that we have or the platform.
Katie Perry (35:18):
Very
Austin Hankwitz (35:18):
Cool. I love it. So as we rewind a little bit now back to Monday dot com's IPO, which was around the time when you joined, was monday.com prepared to IPO? Were you kind of coming in like hold on, we got to make some changes. And what were those changes that you had to implement in the finance department to a successful IPO?
Eliran Glazer (35:41):
This was going back three years, so maybe often I will just mention that I joined Monday four months before we actually hit the red button or whatever button it was in north, I can't remember anymore. But when I came I was actually maybe brought to Monday and I remember the date February 16th and Monday went public in August, sorry, in June 10th. So two and a half months later I remember coming to the office and was brought to a room and people around me said, it's yours, take it. And I looked left and right and I said, yeah, I have to take it. I cannot run now after I signed. So the thing that I had to do immediately is to look at all the systems. You want to make sure that you have the visibility. If you are going public, you have to meet the timelines, you have to have visibility because you give guidance, you have to make sure that you have the right IR people because you may not communication with the investors and this is a long-term relationship and they're your partners and if you don't build the relationships for longer term, it's not going to be good when you have some challenges.
(36:50)
So data integrity, data accuracy, these are the systems, these are the people I had to, during the time I was speaking with analysts and bankers and doing a TTW, I nominated one of the people who were here and I trusted him to be my vp, VP of finance who he was in Monday for five years before I joined and basically worked with him in order to make sure that we have the right people in pace and we were actively recruiting to make sure that we adjust the timelines of the months and we are making sure that the systems are bulletproof because you're reporting, sorry, you're reporting revenue, you want to make sure that you a r. So these are the things that I did immediately. I would say that during the time back in 2021 there was IP mania, many companies at public. This was on the back of COVID at the time.
(37:47)
So you also had to compete with other companies on resource on making sure that you get the right analyst. This was an interesting time. The one thing I would say personally, I am a person that can make decisions. I'm a person that is not falling under pressure. If I may say about myself, not saying it in an arrogant way, just saying it, sorry, I don't want the viewer to, I get it. So when you have to make decision in times like this, there are so many things you just have to be relaxed, breathe, make decisions, don't be, don't worry. And it worked for me and in order to complete my education during when I used to, I worked very early morning until late night I used to listen to earning calls to podcasts. A podcast like this is super helpful because when you hear a podcast you get a lot of kind of ideas, a lot of even the English, what the terminology, I'm an Israeli and although we're a global company, the management team is Israeli. Even the terminology in English, you have to know how to say the right terminology because you go up and you speak with the most important or the most sophisticated investors, you have to learn about it. So from systems to people and people is the number one thing. Systems, people, technology and to be cool in decision making, I would say by and large these are the things.
Katie Perry (39:22):
Yeah, and you talk about being cool under pressure and it's just ir being ir, investor relations is not something people talk about all the time. But you pointed out that was an important muscle to build ahead of the IPO. Of course we're having this conversation in the context of everything that's going on with Roaring Kitty retail investing, obviously you alluded to the post covid boom, more and more regular people investing. I'm curious as a CFO, does that scare you or how are you all thinking about those same relationships you're building on the institutional side, you want the long-term relationship, you want the stability. How does that change for the regular group of investors that you guys now also have to communicate with?
Eliran Glazer (40:10):
Sure. So this is actually a very good question because we came from being a private company that you actually, the CEOs are speaking with the VCs and usually it would be very comfortable kind of conversation because the CEOs of the companies, the tech companies, they get a lot of respect. And you have VCs that are sitting in your board and they would usually cooperate with you. But then you do the transition into being a public company. And this is a completely different audience because they ask you tough questions, difficult questions, they know a lot, they're very, very smart and they put a lot of money in the company. You want to make sure that they will feel comfortable and confident with you. So Byron and Paige, Byron is the VP of I based in US for Monday and Paige is working with him. We hired him in September of 2021, actually three months after the IPO and we were working until then with an agency, but Byron joined and we did a transition.
(41:08)
We said, okay, let's think about the IR strategy. So what Byron did is basically we said, okay, what we want to achieve in the next 12 months, we want to make sure that when we are looking at the shareholders we want to change the kind of the structure. So I can tell you that today from a VC backed company just three years ago who were significantly, the shareholder kind of more than 50% were VCs now it's completely changed. The biggest VC in Monday that was a shareholder of Monday, has now zero shares in Monday. And this was a very healthy process. So replacing the shareholders, the transition was really successful but it was part of a strategy. We did conferences, we did the roadshow, we were very respectful to the investors, we respect them in a way that we went to see them in their offices.
(41:59)
When they asked the meeting, we did the meetings. Now we're very transparent. I think transparency and trust is probably the number one thing I would say when we come in front of investors and you said being not caving under pressure even with difficult question, we're lucky for us, the journey is so far going well, but even if we're challenges, we put them on the table too to the extent we can. I think managing this relationship in a very transparent way, getting trust and actually delivering on our promises is something that build this kind of long-term relationship. And this is something when I came to this podcast, although I did many podcasts, I did a lot of preparation. I dunno if it's going to be perfect or not, but I think you have to be world class. When I lived in New York, I remember back between 2006, 2010 I remember and I was working for the financial industry.
(42:53)
The world has collapsed in 2000, end of 2007, beginning of 2008. And then you have to change with a completely different environment. You need to manage crisis. You need to be as a CFO in the front seat how you do it. You do it by being transparent, by being direct, by being honest. And this is something that goes with me. I always prepare. I prepared before I came to speak with you, I prepare before I speak with investors, although I did it 12 consecutive quarters of bit and wave, I still come there every time as if this is my first time. I want to make sure that I will give them the best answers. And if I don't know, I will say, I don't know. But this is something that is very important. Always try to be a world class whenever you can just do your job the best that you can.
Austin Hankwitz (43:38):
Iran, you are an admirable and inspiring CFO and I hope all the other CFOs listening right now to do their own research. That's just life advice are looking up to you man. You're crushing it.
Katie Perry (43:50):
Yeah, thank you all that. I love that. Take pride in what you're doing. I think that's great insight for everyone at home and again, appreciate you preparing it shows and I think that's a good takeaway. The secret to success is preparation and I really appreciate you letting us in there into how you approach things.
Eliran Glazer (44:11):
Thank you. Thank you for the kind words. I'm a bit embarrassed. I dunno if you saw that I became red, but appreciate this.
Austin Hankwitz (44:18):
No man, you're awesome. And I'm a massive shareholder in my small portfolio is in monday.com. I love the company, I'm a paying user, I'm a customer. I use you guys all time and it's really cool now to see the CFO and just the management team now that's leading this company and just my excitement about monday.com and it has just gone through the roof. So it's what an awesome interview. Thank you so much for joining us on this episode of After earnings and anytime you want to come back, you let us know. Okay,
Eliran Glazer (44:51):
Thank you so much Katie and Austin. It was great pleasure. I really enjoyed and I'm happy I did it. Thank you so much.
Katie Perry (45:00):
So Austin, we covered some ground there. Lots of great insights. What stood out the most to you? I think
Austin Hankwitz (45:06):
The fact that 70% of their customers are non-tech was really interesting how they're also focused on, of course implementing AI across their product suite but doing it in such a way where these non-techies can benefit from it. They're focused on the automation behind the scenes where you don't have to know how to code or use AI in a sophisticated manner. I think that's pretty interesting. I do think though their free cashflow margin flipping from that negative, call it 25% in 2020 to that positive, 28% in 2023 and then just rolling through 20, 24 now, I think they just hit 41% margins. I mean their guidance for a quarter billion in free cashflow throughout the rest of this year is really interesting to me. It's just an unreal company. They've done such a great job building and scaling to El Ron's point of being focused on growth at a cost, right? Understanding that growth does come with some expenses and growth at all costs at no cost focused on just a RR through the moon. Maybe not the best way to grow a profitable tech company.
Katie Perry (46:14):
Yeah, I really appreciate also how he joined the company 2021 as he mentioned four months before the IPO by the way, that was wild to hear about. He really got thrown in the deep end. But he walked us through the behind the scenes of the founding story, which in this case was really interesting and I think says a lot about where the business is now. So two co, CEO founders, engineers, product people, not necessarily commercial people, salespeople. And so the way that this business was built was really on a lot of product led growth. And part of the scaling process has been adding that sales customer support side, which he mentioned is now 50% of their 2000 employees are customer facing. And I think the way they view it is the people are part of the product. And it was really interesting to hear him continue to reiterate on the importance of people as part of their full suite of offerings.
(47:11)
I also really enjoyed when he talked about the shift from private to public and what that meant, especially for investor relations. This is not a function people talk about a lot. It's extremely necessary, but maybe not the sexiest thing going out at a business. But talking about that changes from talking casually to a few VCs and now you have institutional audiences, you have retail investors and I think he really struck on something that was important, which is this concept of the do to say ratio and just having the plan sticking to the plan if you're veering off the plan, communicating that. And I thought that was great insight for people building businesses at all sizes, but also something to look for investors that are kind of gauging what types of companies they might want to add to their portfolio.
Austin Hankwitz (48:00):
Katie, all I know is that we need to have elron back in Q3 when he hits that awesome 1 billion in annual recurring revenue. Mark. It'll be a great episode. I'm definitely looking forward to recording.
Katie Perry (48:11):
Amazing. And with that, I'm Katie Perry. This was the After Earnings podcast brought to you by Morning Brew and Stakeholder Labs. Be
Austin Hankwitz (48:18):
Sure to like, subscribe and share this episode with a friend and we'll catch you next time.
