MongoDB, Inc. — Q2 FY2024 Form 10-Q
Reporting period: Three and six months ended July 31, 2023; fiscal year ends January 31. Amounts are U.S. dollars. The filing is unaudited.
Business context and financial performance
MongoDB sells database subscriptions, principally MongoDB Atlas, alongside support, consulting and training services. Subscription revenue accounted for 97% of Q2 revenue. Atlas-related revenue was 63% of total Q2 revenue.
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Revenue | $423.8m | $303.7m | $792.1m | $589.1m |
| Subscription revenue | $409.3m | $291.6m | $764.0m | $566.2m |
| Gross profit / margin | $318.5m / 75% | $215.4m / 71% | $589.3m / 74% | $422.6m / 72% |
| Operating loss | $(49.0)m | $(114.8)m | $(117.6)m | $(190.8)m |
| Net loss | $(37.6)m | $(118.9)m | $(91.8)m | $(196.2)m |
| Net loss per share, diluted | $(0.53) | $(1.74) | $(1.30) | $(2.88) |
| Operating cash flow | Not separately presented for the quarter | $28.4m | $(33.1)m |
Material changes and liquidity
- Q2 revenue rose 40% year over year; six-month revenue rose 34%. Management attributed subscription growth primarily to Direct Sales Customers. Atlas-related revenue was $267.3m in Q2, versus $193.4m a year earlier.
- Gross margin improved, with subscription gross margin at 79% for both Q2 and the six-month period, up from 76% in the comparable periods. Management cited cloud infrastructure efficiencies; services gross margin remained negative and declined year over year.
- Operating losses narrowed despite higher operating expenses. Q2 sales and marketing expense increased 8%, research and development 16%, and general and administrative 14%. Six-month stock-based compensation was $217.3m, up from $180.1m.
- At July 31, cash and cash equivalents were $607.2m and short-term investments were $1.294bn; together with restricted cash, reported liquidity was approximately $1.9bn. Management said available cash and investments should fund operating and capital needs for at least 12 months.
- Current liabilities were $512.3m, including $348.4m of current deferred revenue. Total deferred revenue was $368.6m, down from $460.3m at January 31. Accounts receivable was $272.4m.
- Convertible senior notes had a net carrying value of $1.142bn and $1.150bn principal, bearing 0.25% interest and due in 2026. The notes became convertible at holders’ option from August 1 through October 31, 2023 after the stock-price conversion condition was met. Their disclosed estimated fair value was approximately $2.3bn.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance is provided in this 10-Q. Management said macroeconomic conditions had slowed growth in existing Atlas applications and expected those headwinds to continue affecting revenue growth for the remainder of the year.
- Management expects continued operating losses and may experience negative operating cash flow in future periods, while stating current liquidity is sufficient for at least 12 months. It expects to continue investing in sales and marketing, research and development, and international operations.
- Atlas usage-based billing makes revenue dependent on customer consumption and less predictable. Other cited risks include customer renewal and expansion, competition, cloud-provider availability and costs, cybersecurity and privacy obligations, open-source licensing, and macroeconomic or IT-spending weakness.
- Operating cash flow turned positive for the six-month period, but included $217.3m of non-cash stock compensation; a $91.4m decline in deferred revenue was a cash-flow offset. Investing cash inflow primarily reflected net maturities of marketable securities.
- The 2026 Notes’ conversion feature may require cash settlement depending on the company’s election and could affect liquidity or reported working capital. The filing also notes potential dilution from equity awards and note conversion; capped calls are intended to partially offset note-conversion dilution.
- On August 2, 2023, after quarter-end, the Federal Circuit affirmed the dismissal of Realtime Data LLC’s patent lawsuit in MongoDB’s favor. The company reported no legal matters it believed would have a material adverse effect as of July 31.
- MongoDB’s former CTO departed in June 2023. The filing also disclosed new Rule 10b5-1 stock-sale plans adopted by three officers during the quarter.
Important facts for investors to verify
- Whether Atlas usage growth and customer expansion recover or remain constrained by macroeconomic conditions.
- Whether improving gross margins and operating losses translate into sustained profitability and cash generation, considering stock-based compensation and deferred-revenue movements.
- The timing, settlement method and potential liquidity, working-capital and dilution effects of the 2026 Notes’ conversion rights.
- Whether the $1.9bn liquidity position remains adequate amid ongoing losses, cloud-capacity commitments and planned investment.
- Customer retention, Atlas consumption, and the continued accuracy and consistency of company-reported operating metrics.