MongoDB, Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2020 (first quarter of fiscal 2021), compared with the three months ended April 30, 2019. The interim financial statements are unaudited. MongoDB provides a developer-focused database platform, including MongoDB Atlas, enterprise subscriptions, and related services.
Financial performance
| Metric | Q1 FY2021 | Q1 FY2020 | Change |
|---|---|---|---|
| Revenue | $130.3 million | $89.4 million | Up 46% |
| Subscription revenue | $124.9 million | $84.0 million | Up 49% |
| Services revenue | $5.5 million | $5.4 million | Up 1% |
| Gross profit / margin | $92.7 million / 71% | $61.2 million / 68% | Margin up 3 percentage points |
| Operating loss | $42.0 million | $30.6 million | Loss increased |
| Net loss | $54.0 million | $33.2 million | Loss increased |
| Net loss per share, diluted | $0.94 | $0.61 | Loss per share increased |
| Operating cash flow | $(5.9) million | $3.2 million | Declined |
| Free cash flow (non-GAAP) | $(8.5) million | $2.8 million | Declined |
Subscription gross margin was 75%, compared with 73%; services gross margin was negative 29%, compared with negative 3%. Operating expenses were $134.7 million, up from $91.8 million. Stock-based compensation rose to $30.6 million from $14.0 million.
Financial position and liquidity
- At April 30, 2020, cash and cash equivalents were $700.6 million and short-term investments were $276.4 million. Including restricted cash, these totaled $977.5 million.
- Total assets were $1.337 billion; total liabilities were $1.274 billion; stockholders’ equity was $63.0 million.
- Convertible notes had a net carrying amount of $923.1 million. Principal outstanding was $1.24 billion: $90 million of 2024 notes and $1.15 billion of 2026 notes.
- Current deferred revenue was $173.1 million; total current and non-current deferred revenue was $193.0 million. Remaining performance obligations were $209.7 million, with approximately 54% expected to be recognized within 12 months.
- Management said existing cash, cash equivalents, and short-term investments should fund operating and capital needs for at least 12 months. The company nevertheless expects operating losses and negative operating cash flows to continue.
Material changes and business trends
- Atlas-related revenue was $54.2 million, up from $30.9 million; Atlas represented 42% of total revenue, compared with 35%. Enterprise Advanced represented 49% of subscription revenue, down from 54%.
- Management attributed subscription growth to both new and existing customers. The company reported more than 18,400 customers, versus more than 14,200 a year earlier, and 780 customers with at least $100,000 in ARR or annualized MRR, versus 598.
- Higher subscription costs included a $5.6 million increase in third-party cloud infrastructure costs. Management cited infrastructure efficiencies as a contributor to improved subscription and overall gross margins.
- Sales and marketing expense rose 50%, research and development rose 48%, and general and administrative expense rose 35%, largely reflecting hiring and stock-based compensation. Total headcount reached 2,020, up from 1,331 a year earlier.
- Interest expense increased substantially, primarily due to discount and issuance-cost amortization and interest associated with the 2026 convertible notes issued in January 2020.
Outlook, risks, and unusual items
- COVID-19: Management expected the pandemic-related slowdown and global uncertainty to negatively affect revenue at least through fiscal 2021. It noted potential disruption to customer demand, sales pipelines, marketing, travel, and collections. The allowance for doubtful accounts increased to $4.3 million from $2.5 million at January 31, partly reflecting potential customer credit difficulties.
- Investment priorities: Management said it planned to continue investing heavily in growth, rather than optimizing near-term profitability or cash flow. Lower travel costs were expected to continue near term, with some savings redirected to marketing and research and development hiring. No specific numerical revenue or earnings guidance is provided in the supplied filing text.
- Convertible notes: The 2024 notes became convertible at holders’ option for May 1 through July 31, 2020 after the stock-price conversion condition was met. MongoDB stated it could settle principal in cash, shares, or a combination; conversion could affect liquidity. The 2026 notes were not convertible during the quarter.
- Legal matter: Realtime Data’s patent lawsuit concerning data compression, storage, and retrieval remained stayed pending an appeal in a separate action. The company recorded no accrual for legal contingencies, stating it believed a material loss was less than reasonably possible.
- Leadership: The filing disclosed that Chief Technology Officer Eliot Horowitz intended to resign as of the 2020 annual meeting of stockholders.
- Other items: Adoption of the expected-credit-loss accounting standard resulted in a $0.2 million cumulative adjustment to accumulated deficit. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether COVID-19-related demand, sales-cycle delays, and customer collection risks materially affect revenue, renewals, and receivables in subsequent quarters.
- Whether Atlas growth and cloud infrastructure efficiencies sustain subscription gross margins as Atlas becomes a larger share of revenue.
- How continuing expense growth, stock-based compensation, and negative operating cash flow compare with revenue growth and management’s investment plans.
- The potential cash, share dilution, and balance-sheet effects of conversion or settlement of the 2024 and 2026 notes, including the 2024 notes’ conversion status after July 31, 2020.
- Developments in the stayed Realtime Data litigation and the transition following the CTO’s planned departure.