MongoDB, Inc. — Q1 FY2023 Form 10-Q
Reporting period: Three months ended April 30, 2022, compared with the three months ended April 30, 2021. Fiscal years end January 31. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
Business context
MongoDB sells database subscriptions, including its hosted MongoDB Atlas service, and provides consulting and training. Subscription revenue was 96% of revenue. Atlas-related revenue was $170.0 million, or 60% of total revenue, versus $93.5 million, or 51%, a year earlier. Management said it continued to invest for growth rather than prioritize near-term profitability or cash flow.
Financial results
| Metric | Q1 FY2023 | Q1 FY2022 | Change |
|---|---|---|---|
| Subscription revenue | $274.6 | $174.6 | +57% |
| Services revenue | $10.9 | $7.1 | +54% |
| Total revenue | $285.4 | $181.6 | +57% |
| Gross profit / margin | $207.2 / 73% | $127.1 / 70% | Margin +3 percentage points |
| Operating loss / margin | $(75.9) / (27%) | $(61.4) / (34%) | Loss increased |
| Net loss | $(77.3) | $(64.0) | Loss increased |
| Diluted net loss per share | $(1.14) | $(1.04) | |
| Operating cash flow | $11.6 | $10.2 |
Subscription gross margin rose to 76% from 74%, while services gross margin remained negative at (26%), compared with (29%). Management attributed improved subscription margins to infrastructure efficiencies, which more than offset the increasing Atlas mix. Higher sales and marketing and research and development spending contributed to the larger operating and net losses. Stock-based compensation was $83.6 million, up from $50.9 million.
Financial position and liquidity
- Cash and cash equivalents were $456.3 million and short-term investments were $1.372 billion at April 30, 2022. Including $0.5 million of restricted cash, management reported total liquidity of approximately $1.8 billion.
- Convertible senior notes had a net carrying value of $1.137 billion and principal of approximately $1.150 billion, due 2026. The notes carry 0.25% interest; their disclosed estimated fair value was approximately $2.1 billion.
- Current assets were $2.096 billion and current liabilities were $503.7 million. Deferred revenue totaled $375.5 million.
- Cash, cash equivalents and restricted cash decreased $17.6 million during the quarter. Investing cash outflow was $28.8 million, mainly reflecting net purchases of marketable securities.
Material changes, outlook and risks
Revenue growth was driven primarily by direct sales customers; management attributed $91.9 million of the subscription revenue increase to that group. Atlas-related revenue grew faster than other subscriptions. The company reported over 35,200 customers, versus over 26,800 a year earlier, and 1,379 customers with at least $100,000 in ARR or annualized MRR, versus 1,057.
Management said macroeconomic conditions affected growth in existing applications during the quarter and expected the environment to continue to affect the business for the remainder of the year. The filing provides no clear numerical earnings or revenue guidance in the supplied text. Management expects continued investment and operating losses, and says existing cash, cash equivalents and short-term investments should fund operating and capital needs for at least 12 months. It also notes possible future negative operating cash flow and the potential need for additional capital.
- Convertible-note conversion: The 2026 Notes became convertible at holders’ option from May 1 through July 31, 2022 after the stock-price conversion condition was met. Future conversions could require cash settlement, depending on the company’s election, and could affect liquidity or share dilution.
- Market and execution risks: The filing highlights macroeconomic uncertainty, inflation and higher interest rates, COVID-19 impacts, customer usage and renewal sensitivity, competition, growth-related costs, and reliance on third-party cloud providers.
- Investments: The company reported approximately $5.8 million of unrealized losses, net of tax, on Treasury securities, which it intended to hold to maturity. Non-marketable securities totaled $7.7 million; their valuation is judgment-dependent and they are exposed to partial or total loss.
- Contingency: Realtime Data’s patent appeal was pending; oral argument had not been scheduled. Management said it had not accrued a loss because it considered a material loss less than reasonably possible.
- Other changes: The company began a five-year Gurgaon office lease with estimated base rent payments of $7.0 million. No material changes to other contractual commitments were reported.
Important facts for investors to verify
- Whether Atlas usage growth and the macroeconomic effect on existing customer applications evolve as management anticipated.
- How revenue growth, gross margins, operating expenses, stock-based compensation and cash generation trend in subsequent quarters.
- Whether holders convert the 2026 Notes during the May–July 2022 window, and the resulting cash, share-count and balance-sheet effects.
- The valuation and performance of non-marketable investments, and any changes in Treasury-security losses or liquidity.
- Developments in the Realtime Data appeal and any change in the company’s assessment of legal contingencies.