monday.com and Krispy Kreme IPOs: What You Need to Know

monday.com Ltd. (MNDY), a maker of workplace software, went public on June 10, 2021, to raise working capital for operational expenses, including advertising and marketing as well as technology development. One percent of the proceeds from the initial public offering (IPO) were also set aside for the monday.com foundation, a charitable initiative started by its founders.

monday.com calls its product a workplace operating system (OS) that provides the building blocks for organizations to incorporate new functionality, from project management to department processes, into their business. The distinguishing feature of monday.com's software is the simple interface, which requires minimal knowledge of coding. 

During the IPO, monday.com offered 13.7 million shares to the public, priced at $155 apiece, above the price range of $125 to $140. The stock opened for trading at $173.5 on NASDAQ and rose to a high of $182 during the course of the day. At the end of the first day of trading, monday.com had raised $574 million and had a market valuation of $7.5 billion. Since their debut, monday.com shares reached a peak of $233.25 on June 23 and are trading at $198.27, as of July 20. 

Krispy Kreme, Inc. (DNUT), a maker of doughnuts and other sweet treats, offered 29.4 million shares priced at $17, below the previously announced range of between $21 and $24, on July 1. The company was expecting to raise approximately $4 billion from the markets. By the end of their first day of trading on NASDAQ, Krispy Kreme's shares were trading at a price of $21. It had raised $500 million from the markets for a valuation of $2.7 billion.

Krispy Kreme shares have been on a downward slide, never reaching their debut high, since the IPO. As of July 20, they are changing hands at $16.27.  In its S-1 filing, Krispy Kreme stated that it planned to use proceeds from the public offering to pay down its considerable debt of more than $1 billion and for general business expenses.

monday.com Founding and History

monday.com was founded in 2012 by Roy Mann and Evan Zymann. Both founders had started companies for brief periods of time prior to coming together to work at monday.com. Mann was a senior executive at Wix.com, a no-code website building company, when he developed the first iteration of monday.com to solve project management problems at his company. He brought on Zymann, who was working at a mobile technology company, to help scale the solution. They launched a working product in 2014. In its earlier avatar, monday.com was known as dapulse, and it was renamed after it began expanding internationally in 2017.

monday.com is part of a growing suite of applications that require zero to minimal knowledge of coding skills for implementation and operation. Such products encompass a wide variety of industries, from website company Wordpress to project management tool asana. Research firm Gartner has stated that 65% of application development will be no- to low-code by 2024. While monday.com started as a project management solution, it has pivoted to becoming an all-encompassing solution that integrates multiple functions related to running a business, such as human resources and finance.

Krispy Kreme Founding and History

Krispy Kreme has a much more storied history. The chain was founded in 1937 and is considered a "national treasure." This is the company's second innings in public markets. It went public during the dotcom bubble of 2000, when its shares popped by 76% on the first day of trading. An investigation by the Securities and Exchange Commission (SEC) in 2004 for accounting irregularities tanked its stock price to $1, however. Management issues and a subsequent societal shift away from sugary foods toward health-conscious alternatives also roiled its business. Krispy Kreme went private in 2016 after being purchased by a subsidiary of German investment firm JAB Holdings Company for $1.35 billion.

During its time away from the public markets, Krispy Kreme has focused on expanding its retail presence, offline and online, and reinventing its brand. It also acquired a majority stake in Insomnia Cookies, a millennial-focused cookie maker, and opened more locations abroad. 

According to its S-1 filing, Krispy Kreme boosted its physical presence from 5,842 locations in March 2020 to 9,077 by April 2021. These locations are spread across 30 countries. The company has transitioned away from its earlier franchise model and now directly owns 86% of its total store count.

Last year, Krispy Kreme launched a 24-hour flagship store in New York City's Times Square, featuring a glazed waterfall that enables customers to watch preparation of its original glazed donuts at scale in real time. The store is meant to capitalize on the craze for experiences via social media.

monday.com Key Financials

monday.com had annual revenue of $161.1 million in 2020, up 106% from 2019. In 2018, the company was estimated to have $50 million in revenue. The COVID-19 pandemic's enforced remote work policies have become an accelerant for the company's business. In addition to an increase in revenue, the number of customers at monday.com surged.

At the end of 2020, monday.com had 113,888 customers, up by 151% from Jan 1, 2019. A Forbes profile of the Israeli company states that it had 120,000 customers in June 2021. Since monday.com's revenue depends on recurring billing, an increase in the number of customers is a good sign. The company's customers are spread over 200 industries and 190 countries, with 52% of monday.com’s revenue for 2020 coming from customers located outside the United States.

The jump in monday.com's revenue has come alongside steepened losses, which multiplied from $91.6 million in 2019 to $152.2 million in 2020. Those figures are mainly the result of increased spend on operating expenses. For example, its marketing expenses increased by 61.4% to $191,353, and administrative expenses jumped by 251.5% to $54,339 between 2019 and 2020.  The emphasis on spending for operations and to acquire new customers means that the company has a negative operating margin of -93.43% as of this writing.

But the company's gross margin is positive. It was 89.2% during the first quarter of 2021. At the end of 2020, monday.com had cash and cash equivalents of $40.6 million, a slight increase from the $38.4 million on its books in 2019. 

Like most Software-as-a-Service (SaaS) companies, monday.com relies on deferred revenue as an accounting tool on its balance sheet. Deferred revenue refers to the revenue that will be recognized in the next 12 months based on monthly subscription contracts. As of Dec. 31, 2020, monday.com had deferred revenue of $70.7 million, up from $$40.9 million a year ago.

Krispy Kreme Key Financials         

Krispy Kreme had revenue of $1.1 billion in 2020, an increase of 17% from 2019 figures. That figure was a slowdown from the previous year, when it recorded a 22% increase in $959.4 million annual revenue. For its most recent quarter ending in April, the company reported a revenue jump of 23.1% from 2020 figures to $321.8 million. One-third of Krispy Kreme's sales came from outside the United States in 2020, and e-commerce accounted for one-fifth of all sales.

The North Carolina company's spending has kept pace with the increase in its revenue. For example, its selling, general & administrative (SGA) expenses and operating expenses shot up by 34.4% and 65%, respectively, between 2019 and 2020. Those skyrocketing expenses resulted in a net loss of $60.9 million. In its latest quarter, the company reported net losses of $0.3 million, down from $11 million last year, mainly on the back of income tax benefits.

Krispy Kreme had debt of $1.2 billion in April this year. It used 4.3% of its total revenue for the quarter to pay interest on that debt. Last year, interest expense on debt amounted to 5.1% of annual revenue figures, according to the company's S-1 filing. Krispy Kreme had cash and cash equivalents of $50.6 million during its latest April quarter, up from $37.4 million in January.

How Much Is monday.com Worth? 

According to Crunchbase, monday.com raised a total of $234.1 million over six funding rounds in private markets. Prominent investors in the company included London-based Entree Capital and Hamilton Lane. In 2018, it was valued at $550 million. By July 2019, when it raised $150 million in a Series D round from investors, monday.com was worth $1.9 billion.

Just before monday.com went public, cloud customer relationship management (CRM) company salesforce.com, inc.'s (CRM) venture arm and video conferencing company Zoom Video Communication, Inc. (ZM) purchased $75 million worth of shares in the company at its public offering price, according to a regulatory filing. The frenetic increase in monday.com's valuation has continued in public markets. At the end of its first day of trading, monday.com was worth $7.5 billion. By the close of trading on July 19, 2021, the same company's valuation had risen to $9.2 billion in the market's estimation.  

Like most tech entrepreneurs who have publicly listed companies, the monday.com co-founders have retained veto power for business matters related to the company.

How Much Is Krispy Kreme Worth? 

Krispy Kreme was taken private by JAB Holdings in 2016 in a $1.35 billion deal that valued its shares at $21 apiece. The company was hoping for a $4 billion valuation upon its return to the stock market, but response by analysts and investment firms was largely unenthusiastic, and it ended the first day of trading at a valuation of $2.6 billion. At the close of trading on July 19, the company had a valuation of $2.77 billion.

Analysts and commentators argue that the company's mounting losses – $12.4 million in 2018, $34 million in 2019, and $60.9 million in 2020 – are proof that its revenue bump has occurred at the expense of net profit.

Since the IPO, JAB Holdings has retained its position as the company's biggest shareholder. A subsidiary of JAB Holdings paid $94.3 million on July 6 for 5.9 million shares, bringing the total number of shares it held to 68 million. The investment firm also holds voting power for Krispy Kreme's common stock, meaning that it will have the decisive say in matters that come up for stockholder votes. The firm will also be able to influence management strategy and board of directors composition from this perch.

monday.com Key Competitors 

monday.com claims to have created a new product category called Workplace Operating System. This operating system includes and integrates applications across multiple departments in an organization. As such, the list of competitors is a long one and includes cloud applications for various departments.

For example, privately held asana is a project management tool that has a similar target market and interface as monday.com. Investor salesforce.com can also be considered a competitor because it offers customer relationship software functionality, also offered by monday.com, in its product suite. Other companies listed in the company's S-1 filings as competitors are remote desktop company Citrix Systems, Inc. (CTXS) and Atlassian Corporation Plc. (TEAM), which makes project management software.

Krispy Kreme Key Competitors

Competition for Krispy Kreme comes in the form of other doughnut vendors and coffee shops or chains that sell products similar to Krispy Kreme's portfolio. Included in this list are large publicly listed multinational chains like Starbucks Corporation (SBUX) and local doughnut shops that have a strong regional presence. An example of the latter is Portland, Oregon-based Voodoo Doughnuts, which is expanding its locations across the United States and took an investment from Fundamental Capital, a San Francisco-based private equity firm, in 2017.

The Bottom Line 

monday.com, a maker of workplace software, and doughnut maker Krispy Kreme went public in June and July, respectively. Both IPOs received dramatically different responses from investors. monday.com witnessed a bump in its offering price and valuation. Krispy Kreme's public offering experience was not as sweet. The doughnut maker's shares were priced below the expected range, and its valuation has not moved much, as compared to monday.com, since its IPO.