monday.com Ltd. (MNDY) Earnings Call Transcript

Please welcome the monday.com management team to the stage.

Great. Thank you all for joining us at Elevate 2026. And thank you, particularly for management, putting on this investor Q&A session. I really appreciate it. I'm Byron Stephen, Vice President of Investor Relations. To my left, I've got Eliran Glazer, Chief Financial Officer of monday.com; Eran Zinman; and Roy Mann, who are co-founders and co-CEOs of monday.com and Casey George, our CRO. So this is an open format. I will remind everybody that we will be reporting our Q3 earnings here very shortly. So we'll try to keep this less focus on numbers and not talking about our Q3 upcoming Q3 results, but more on strategy and product as much as possible. Anybody who is listening to this on audio, we are live streaming this through our Investor Relations website. If you have any questions, feel free to e-mail us at ir@monday.com, and we'll be happy to take those questions as well. So we've got 2 mic runners around here, and we'll just open it wide for Q&A.

Great. Can you hear me okay?

Yes, we can see, Steve.

Great. Steve Enders from Citi. Thanks for hosting this great event today. Maybe I just want to ask on a lot of focus on agents and trying to drive adoption. I guess, how are you thinking about the organic, getting people to adopt it that way versus needing a services element. And I guess, what are you kind of doing with Frontier and the services model to enable that for your clients?

Thanks for the question. So look, I think I'll start first with generally speaking. Feedback that we constantly hear from customers is that nobody is kept to call AI, everybody understands AI is promotive technology. I think we're now in the phase of adoption where customers are saying, we've been on the side of, let's do TOKIN Maxine, just by an eye for the sake of buying AI. And we've now transitioned into a phase in the industry where customers are saying, we want to see return on investment. We want to see actual business impact whether it's reducing cost or increasing the top line revenues. And I think there's a big gap between the fact that technology exists to actually adopting it. We're here across the board from customers, customers who bought licenses to use all kind of AI software but saw a marginal gain in terms of efficiency. And they understand and the feedback we hear is that in order to drive a real change in their own company, their own business, they need deep adoption and guidance more than anything. We heard that feedback. What we announced in our keynote earlier this morning is, first, that we're establishing a new organization called Monday Frontier. It's basically a combination of managed services for deploy engineers. We're going to scale this massively going to 2027. We see a lot of demand from customers. They basically say, we want your experts to drive the change within monday, the deployment of monday. And what we also hear from them is that they want to do it on the platform because they have most of the data inside monday, the contacts. They have people already using the platform from across the company. And something we emphasize a keynote is that we want people and agents working together. Having people built agents in a silo way doesn't help. In order to drive real change, you need people and agents, data in context, only in one place. So I think this is a big opportunity for us. This is the way company is going to adopt the AI going forward. And this is exactly what we're going to focus on as a company.

This Matt Bullock from BofA. We hear a lot about context being critical from software vendors. It would be great if you could help us understand the context that lives inside the monday platform? How you guys differentiate versus a lot of peers in that context advantage? And then high level, your strategy for API, MCP and allowing third-party agents to tap into that context longer term?

Yes. So I can take this. So yes, it is critical. It's like a bunch of things. It's context, but also guardrails. Okay, like access to data and governance. We've just been with the cab. That's like one of the #1 concerns in enterprises. Okay. I have my data in here, but like I really want to know who's accessing what, when and to trust that. So that's like another really critical element. And the context is, it worked for us, okay? And like you want the agent to do stuff, it knows what all the team did and your projects, your company, your role, what do you need to accomplish? It's already in there. And so that's a critical part. And then it knows also to ask for other stuff that might be in other areas. We see this as like the magic part, right? Like you asked it knows already and like Daniel shared on the stage, he said, like, what do you need to do for it? Says nothing. And I think that's like a killer part because it also -- it's not only that it's easy to use. It also allows us to create really good agents because we know before and we can analyze all the data ahead of time, so the agent can also suggest stuff. It also knows it, and it's a better agent. It's not just like pulling the data. It's also like having the right agent to do that stuff and look in the data in a certain way. But that's one part of it. And the other I'll answer your question of like external agents. We don't think we're going to be the only agent platform, and it's all in one. There is obviously a massive advantage for having a suite that covers everything like we are doing. But there is also a lot of power in connecting to anything else, okay? So whether it's any other sort of data that you can pull in and any other agent that you can pull in and we're equally dedicated to opening up the platform because, again, like we said, the real value comes from having everything work together, okay, when I write something to you and your agent jumps in the conversation and whether it's on monday or not and have that context or another context, you can imagine, like synergies happen and it becomes like a multiplier. So we can also provide all of it like you're a smaller customer probably, but for the larger enterprises, we're going to be like a bigger, let's say, piece of the puzzle of all their AI infra.

And maybe just to be more specific. So today, you can need mondays through the APIs through MCP, everything is open, you can use monday headless if you want. And also you can import any third-party agent, whether it's on Claude or even personal agents onto the platform it's going to be like any other user and we don't distinguish which we native build agent within the platform to third-party agents.

Arjun Bhatia with William Blair. Roy, around your keynote, I think, was highlighted change as like a pretty important theme. It seems like there's a lot changing obviously, in the environment in the market and then at the company also. Historically, like we've always looked at monday through the lens of work management, CRM, dev, et cetera, service. Is that still the right way to kind of think about the company? Or does that need to evolve? And are you going to become sort of AI agent orchestration. And is there a new sort of framework or product lens through which we should sort of view the business going forward?

Yes, it's a good question. I think it definitely evolved, I would say, specifically in the last year in 2 ways. One, I think historically, monday was perceived as just the project management software. I would say more broadly like work management, but very project-oriented sense. I think all the use cases you've seen today from customers and also I think Daniel highlighted in his own presentation. This evolved tremendously in the last few years. People today, what they do on monday is to manage critical business processes. Now it's different kind of processes across the company. that there isn't like off-the-shelf software to do that. But because monday flexibility and nature of how you can use the product, companies from different industries, manage critical business processes. I think in a way, this is a big opportunity also in the age of AI because as much as our goal as a company remains the same, which is to drive acceleration for businesses, improve their efficiency and revenue. I think the TAM has dramatically increased, not decreased. Because what now companies or our customers can do with the platform is much greater in terms of the business impact that they can generate on top of us. And just in terms of CRM and service so also with CRM service, we think this way. So they've taken a more independent path of how they evolve, also putting a lot of emphasis on a agentic offering that we offer in each one of those verticals.

Yes. And from my perspective, it's like you can look at it like work management has like -- it's always been a place to kind of connect the organization collaboratively. And you can think about it that it's like expanded a lot with agents because what they do is very general with us, and they can connect like customers can connect, a lot of different aspects of the organization. You can argue that other agents do the same. And there, I think like the, let's say, historical quadrant, is a question, right? Because the borders are kind of diffusing between areas, and that's also why it's important for us to first connect to other vendors. And I think that's where the customers are that they are asking themselves what we want? Like it's not as if AI was a technology that was born to solve the problem. It's now a technology looking for things it can improve. And I think that's what customers are doing. And with that, borders are kind of like blurred in where for the different boxes. And I think we -- and that's what I think Eliran mentioned as an opportunity for us in a lot of ways because we're entrenched in the white space and connectivity of a lot of things. And so if we go to market well, we'll capture that area.

DJ Hynes from Canaccord. So there's tons of great AI ROI examples today in the presentation, whether it was growth, productivity efficiency. To me, it seems like a lot of the examples you cited skewed a little more SMB or departmental. A, is that the right read for where we are today? And then b, like what needs to be the unlock to take that into the enterprise, right? Is Frontier part of that, maybe I'll leave it there and any observations you have of kind of where we are in that evolution?

Yes. So I can start. So -- we actually tried to give a mixed-use case study. So we had one from a 100-person company, one from a 10,000-person company. Actually, we're seeing way more adoption with our enterprise customers on AI agents, triple the adoption compared to SMBs. So I think we have a larger portion of SMB in terms of percentage, of course, from the total customer count. But in terms of adoption, willingness to use, willing to spend we see much more potential in the enterprise segment. And also, our strategy is very much focused on continuing to go up market and focus our enterprise customers. I think in a way, and Roy just mentioned, we just met with the customer advisory board, speaking along with enterprise customers. They're actually thinking about monday as a potential solution to how they can adopt the because their biggest fear is that if we give AI all the freedom in the world, without guardrails, it can hurt their business, and there's a lot of concern around it. Because we built our agents and our AI offering on the monday platform, which is enterprise safe, it's secure, they have full control. They know exactly what data is in it. I feel to feel much more confident. And I think Monday Frontier will accelerate that because others are saying, we trust the brand, we trust the company, we trust the product, people have the product, I need your help with those experts to find those use cases going to make an impact on my business. I think this is our biggest opportunity, and this is the basic segment we're going to go after in the next year.

The only thing I'd add there is we have to be successful at both. The product organization is hyper-focused on building what I'd call accelerators. So as an SME customer, if you can give them 80%, they can get all the way home with the rest of the agent. That's one of the things we're here at loud and clear. And as Ron just mentioned, as we move up market, it is very clear and our customers are screaming it. Please help me. I don't know where to start. I don't know how to do this, I need someone to ask the right questions, right? And so that -- a little bit has surprised us. I would say that the enterprise has been such a huge growth opportunity for us for agents. But we got to do both.

Yes. Thank you guys so much for the time. Taylor McGinnis with UBS. Two-part question on Frontier because that seems to be the big announcement coming out of today. The first is this seems like a bit of a change in strategy for you guys because if you think about Monday historically, it's been very easy to get up and running. So one, could you give us a sense of how big about lift that might be for you guys just in terms of costs and bringing all of that hiring in? And then secondly, to the extent that you guys have been trialing frontier with some customers, I would love to just hear early feedback on what you guys are seeing with ROI and use cases being unlocked and payback periods. Just anything that you guys could give us a sense for what this opportunity could become.

I'll start can-like just one point that is important for me to highlight, it's still the core of Monday to make things easy and simple. And I think you saw that in the presentation, it's critical for us. The frontier part is to help them think about the business, the value and not about using it. It's about -- because then they will build something and they'll own it, okay? It's about holding their hand and helping them and be consultative in that respect. So...

Yes. Yes. I think what Roy is saying is erect correct. I think the problem is not the user interface or the easiness of use. I think this is something that we know how -- very well how to do. and a lot of confidence in that front. I think the biggest problem is to identify which areas in your business can be improved with AI. And then how do you drive the change because it's usually from our experience, like it's not like one thing you need to change and there's multiple people involved, multiple risk involved, and it's very complex. Look, we've been very focused working closely with our customers in the last 6 months. Like I said, they love the brand, they love the product. They have good usage and already a lot of data at it. It's a big advantage. I think one of the biggest issues right now with AI, with companies trying to implement AI is to go to market. It's a very noisy market. Everybody is saying the same message. And people don't know they feel fatigue about all the messaging to hear around them. And eventually, they want to go with brands their trust. So I think it replaces our benefit. We've seen a lot of success so far. This gives us the confidence to scale Monday Frontier going forward to do more implementation like this. So we're going to hire for that this year and next year. We're going to put a lot of focus on that and offer it to a majority of existing and new deals.

Great. I have one question online that's been submitted. It's going to be for Eliran. Without discussing near-term guidance, if growth remains below historical levels, how would you adjust spending to protect free cash flow?

So we continue to operate, as we said in Q2 when we disclose the numbers. We continue to operate in a way that is efficient, meaning we're looking at growth. But on the same time, we're looking at our bottom line, continue to be efficient on the way we manage post riff and we did the riff and we announced it. And we said that we had a gross savings of potentially $100 million that we're going to invest the majority of it, but we are still looking at our cost components such as AI cost, such as investment in headcount. So we keep the balance of investing, but also looking at the efficiency metrics that we always looked at.

Allan Verkhovski with U.S. Bank, BTIG. Congrats on a great event. The keynote energy was phenomenal. I want to ask a follow-up question to one of the things you were talking about earlier, which is around your API limits. And so I think I heard that customers are now getting notified when they exceed their daily API limit. And you'll be monetizing API add-ons next year. So can you talk about the activity and factors you saw that led you to begin enforcing these limits? How meaningful can this be? And then lastly, can you talk about how the user mix has trended between monday.com users that are exclusively using your MCP versus broader AI capabilities inside of Monday?

Yes. So first of all, we always had limit to our API for plan, so that hasn't changed. But basically, when we think about pricing strategy, and this is something we announced a few quarters ago, we want to leave more of a hybrid model of seats and consumption. We unified our credit system. So whether you use monday vibe or agents or AI comes within the Board or AI workflows is going to take the credit for one pool of credit. And we're going to allow our customers to not just pay for seats, but have like consumption model in addition to that. Over time, I think we'll introduce more and more of those capabilities into the product as we see that customers are leveraging the platform in different ways, and we want to allow them to scale regardless of their headcount. So again, like over time, I think it will shift, but I think we're very focused on a hybrid model right now. So we kind of might see more features like that coming into play.

Elizabeth Porter from Morgan Stanley. I wanted to follow up on the idea of the different quadrants and how AI is blurring some of the lines between these. And so my question is, does the shared AI layer change of the cross-sell opportunity across work management, CRM, service and dev. And what are you seeing from customers as it relates to AI driving a willingness to adopt more products versus just monetizing more of those existing deployments?

We continue with the multiproduct strategy and all of our AI capabilities and our assets span across all of our products. So that's definitely an integrated point that our customers really like, right, so they can leverage what they build in work management and also leverage that in Cerium and service, et cetera. So that obviously helps us as we cross-sell. The second part of your question was remind...

[indiscernible]

Yes. And obviously, if they can use some of these assets across multiple products. Obviously, their utilization goes up. So it is a self-fulfilling prophecy in a lot of ways, and we are starting to see that. We did accelerate some of our capabilities in CRM. So some of the agents that we built that were specifically for CRM came online sooner than our AI workspace. So those things have helped us in the reverse with our AI Workspace platform. So it's, again, a self-fulfilling prophecy.

If I use Daniel's metaphor for a recession about the batteries being included. I think work management broadly is a more diverse product. Every customer is using it in a different way. I think the benefit of both CRM and service specifically is that we can build very specific agents and AI use cases. They are built specifically for CRM service. So it's a little bit easier to adopt for our customers. And there's a lot of potential with those specific agents as well. So it's a little bit of a different use case. I feel Monday Frontier will be, let's say, more needed for the work management part, where CRM and service. Again, this is just our intention. It's going to be more easy to adopt using the building agents that we offer.

Mark Schappel with Loop Capital. Regarding the rebranding strategy. I was wondering if you could just talk a little bit about what specific commercial problem the rebrand is intended to solve here. Would it be like limited enterprise awareness, the perception that you're just kind of a work management tool. Maybe just talk a little bit more about the rebrand strategy?

Yes. I mean, first of all, we feel we've been with the Monday logo for a long time. This is after we brought in through our previous name, which was the pulse, and we're very excited for this change. It's not a major change as it was back then, but it's I think we feel that the company's strategy have evolved since then and the offering we can offer to our customers much greater than what it was. We've seen that from the use cases, we see it in that from the feedback we get from customers. I think in a way, it will open up people to listen more to our story and kind of rethink what monday can be for them. I think now with everything going on in the market with a lot of noise. I think it's a method for us to set up a little bit of noise, till the Monday story again. I think for a lot of customers that heard about Monday in the past is still perceived maybe as a limited work management or project commitment. I think in a way, the rebrand will help us reposition Monday as the AR Workspace for teams. Open up new messaging and new ways to come into customers, they can do much more with the platform today and also talk about the fact we're going to be there to help them solve and maybe find opportunities to leverage AI more. So I think it's more of a facelift, a way to tell a story again, open up to new customers and continue to go in up market the way we've done in the past few years.

I have one more question online. I think this one is probably more for Casey. What most often limits expansion within enterprise customers? And what are you changing to address it?

I would say a lot of our opportunities as we move up market, as you can imagine, these enterprise customers have multiple platforms, right? So there's constantly rationalization going on with their vendors. And this is where we shine a lot of times. We typically win in these instances. So what typically happens and it slows us down sometimes, they've got to organize whatever they have today and figure out how they're going to move it to us. So to the extent we can help them accelerate that with our services to migrate over, that's great. As you can imagine, they build a lot of workflows and a lot of different platforms and it's tightly integrated into what is a pretty complex infrastructure. So that's PAUSE -- that's the one thing that slows us down sometimes. I don't think that's unique to us, but we do see that a lot. And we see it a lot because a lot of our expansion opportunity upmarket is taking out the competitor.

This is [indiscernible] from Wolfe Research. Maybe one 1 on the voice AI agent harmony that you launched, which is obviously pretty exciting, and it's one of the highest growing markets out there, but also one of the most competitive ones with a lot of AI start-ups competing in there. So maybe what are you like seeing there with early adoption and early feedback? And then two, what do you think will be your right to win? And what differentiates you there versus other products in plant product in the market? Is it like specific use cases or anything around the models? What is sort of the right to win there?

Yes. So it started with us making a decision that voice is a strategic path for us or like something capability. We'd like the platform to have PAUSE -- so we acquired one AI,the start-up, and that's like the seed that grew Harmony. And essentially, PAUSE -- the product has a lot of unique capabilities. We build our own models like really small lightweight models that identify a lot of stuff really needed to have high-quality conversations and high-quality voice conversation. Just to give you an example, when someone answers, like identify, it's a voice mail and not start talking into the voice mail as if it was a real person. So like we're really good at that and a lot of other stuff. And so we do have some advantages right now that we're winning over competitors in quality, but I think it's like more strategically something we need to own and to incorporate in a lot of other solutions and especially with the frontier that we see a lot of use cases. If you pull voice in, it kind of solves for opens up the door to a lot of other use cases and connectivity throughout the organization.

I'll just add to that, 2 things. One, it's a separate website, separate go-to-market, Harmony.AI. So we separated that from the platform. It's a completely separate product. We -- one of our assets is a company we have over 200,000 customers. So again, the go-to-market right now is very fuzzy. A lot of our customers expressed interest in voice agents. So I think there's an opportunity to sell that to our customer base. And also, what we've seen from customers at a lot of the times that a voice call from their own customers become a process later on within the company. I feel there's a big chance of 1 plus 1 equals 3 here, integration with monday, making it each call, make it in a workflow. So we'll also see some integration there. But they have their own go-to-market and they're approaching our existing customers. They have a booth here to Elevate, and we see a lot of interest from our existing customers.

I'll add one thing here as well. And I think those of you who know this industry and market with contact centers. I think everyone would agree it's probably the most ripe industry for disruption. And this platform is not an SMB platform necessarily. It scales all the way up to the largest customers. So we can support and go all the way up to the top of the market. And as I just said, in a market that is ripe for disruption. And the stack that they have built in this platform is second to none. So it's a huge opportunity. We're super excited about it. And I'm even more excited about the fact that we can continue to support our upmarket motion.

Having said that, it is a startup. So we're just starting, and then we'll see...

[indiscernible] from JPMorgan. Casey, you touched on this earlier, but with a significant portion of your ARR still from the sub-$50,000 customer cohort, how much are you going to continue start to offer frontier to your lower scale customers? And on that point, we've been hearing from kind of channel partners that maybe the enterprise customers are receiving a little bit more attention in terms of standing up monday's AI products. Do you see that as true? And how much are you going to invest into kind of your base customer cohort?