MongoDB, Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended April 30, 2021; comparisons are with the three months ended April 30, 2020 unless noted. The company sells database subscriptions, including MongoDB Atlas and Enterprise Advanced, and related services. All amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 FY2022 | Prior year | Change |
|---|---|---|---|
| Total revenue | $181.6 million | $130.3 million | +39% |
| Subscription revenue | $174.6 million | $124.9 million | +40% |
| Services revenue | $7.1 million | $5.5 million | +29% |
| Gross profit / margin | $127.1 million / 70% | $92.7 million / 71% | Margin down 1 percentage point |
| Operating loss | $61.4 million | $42.0 million | Loss widened |
| Net loss | $64.0 million | $54.0 million | Loss widened |
| Net loss per share, diluted | $1.04 | $0.94 | Loss per share increased |
| Operating cash flow | $10.2 million | $(5.9) million | Improved |
| Free cash flow, non-GAAP | $8.4 million | $(8.5) million | Improved |
MongoDB Atlas-related revenue was $93.5 million, up from $54.2 million, and represented 51% of total revenue versus 42% a year earlier. Revenue from other subscriptions was $81.1 million versus $70.7 million. Net ARR expansion remained above 120%; 1,057 customers had at least $100,000 in ARR or annualized MRR, versus 780. The company reported more than 26,800 customers, compared with more than 18,400 a year earlier.
Operating expenses rose to $188.6 million from $134.7 million, including sales and marketing of $97.9 million, research and development of $64.8 million, and general and administrative expense of $25.9 million. Stock-based compensation increased to $50.9 million from $30.6 million. Atlas growth and higher cloud infrastructure costs contributed to lower subscription gross margin (74% versus 75%) and overall gross margin.
Liquidity, debt and balance sheet
- Cash, cash equivalents, short-term investments and restricted cash totaled $935.6 million at April 30, 2021. Management said these resources were expected to fund operating and capital needs for at least 12 months.
- Cash and cash equivalents were $407.1 million and short-term investments were $528.0 million. Total assets were $1.378 billion.
- Convertible senior notes had a net carrying value of $1.192 billion; the notes’ principal totaled approximately $1.209 billion after conversions. Total liabilities were $1.646 billion, and stockholders’ deficit was $268.4 million.
- Operating cash flow benefited from increased collections and deferred revenue, while accrued liabilities declined, primarily due to commission payments. Financing cash use included $27.6 million of principal repayments on converted 2024 notes.
Material changes, outlook and risks
- Convertible-note accounting: The company early adopted ASU 2020-06 on February 1, 2021. Adoption increased the notes’ carrying value by $261.5 million and reduced additional paid-in capital by $309.4 million, with other transition adjustments; prior periods were not restated. It also eliminated amortization of the notes’ former debt discount, contributing to lower interest expense year over year.
- Note conversion: Conversion conditions were triggered for both the 2024 and 2026 notes. Holders could convert during May 1–July 31, 2021. The company may settle future conversions in cash, shares, or a combination; cash settlement could affect liquidity and share settlement could dilute shareholders. Capped calls are intended to partially offset potential dilution.
- Management outlook: The filing gives no quantified revenue or earnings guidance. Management expects continued investment in sales, marketing and research and development, and expects operating losses and negative operating cash flows to continue. It also expects near-term revenue to remain negatively affected by COVID-19-related slowdown and uncertainty, despite strong reported quarterly growth.
- Other risks and unusual items: Atlas’s increasing revenue mix may pressure gross margin because of cloud infrastructure costs. The company also cites competition, execution and customer-retention risks, security and privacy exposure, and dependence on third-party cloud providers. A $9.0 million acquisition included $4.5 million of cash consideration allocated to the purchase price and $4.5 million expected to be recognized as post-combination compensation expense.
- Legal contingency: Realtime Data alleges infringement of three patents and seeks damages and injunctive relief. In a separate action involving the same patents, a court dismissed the case without prejudice on May 4, 2021, finding the patents invalid; Realtime filed an amended complaint against MongoDB on May 18. The company reported no accrual, stating it did not believe a material loss was reasonably possible as of April 30.
Most important facts for investors to verify
- Whether Atlas growth continues and how cloud hosting costs affect subscription and overall gross margins.
- Whether revenue growth translates into durable cash generation, given continuing net losses and substantial stock-based compensation.
- The timing, cash-versus-share settlement choice, and potential dilution or liquidity impact of convertible-note conversions.
- Whether COVID-19 and broader economic conditions materially affect demand, customer renewals, sales cycles or management’s investment plans.
- Developments in the Realtime Data litigation and any resulting financial exposure.