MongoDB, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and first nine months ended October 31, 2022; comparative periods ended October 31, 2021. Amounts below are U.S. dollars.
Business context and reporting period
MongoDB sells a general-purpose database platform, primarily through subscriptions. MongoDB Atlas is its hosted, multi-cloud database service; customers can also use MongoDB Enterprise Advanced in cloud, on-premises, or hybrid environments. Subscriptions generated 96% of revenue in the quarter and nine-month period. Atlas represented 63% of quarterly revenue, up from 58% a year earlier.
At October 31, 2022, the company reported more than 39,100 customers, compared with more than 31,000 a year earlier, and 4,534 employees, compared with 3,223.
Financial performance and liquidity
| Metric | Three months ended October 31, 2022 | Year-over-year change | Nine months ended October 31, 2022 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $333.6 million | +47% | $922.7 million | +52% |
| Subscription revenue | $320.8 million | +47% | $886.9 million | +52% |
| Gross profit | $240.0 million | +51% | $662.6 million | +56% |
| Gross margin | 72% | 70% prior year | 72% | 70% prior year |
| Operating loss | $82.9 million | $76.8 million prior year | $273.7 million | $210.7 million prior year |
| Net loss | $84.8 million | $81.3 million prior year | $281.0 million | $222.4 million prior year |
| Net loss per share, diluted | $1.23 | $1.22 prior year | $4.11 | $3.49 prior year |
Quarterly revenue growth was led by Direct Sales Customers; management attributed $95.0 million of the subscription revenue increase to that group. Sales and marketing and research and development spending rose substantially. Quarterly operating expenses were $322.9 million, up from $235.2 million.
Stock-based compensation was $99.2 million for the quarter and $279.3 million for the nine months, versus $68.7 million and $177.3 million, respectively, in the prior-year periods.
Cash flow: Operating cash use was $38.8 million for the nine months, compared with $15.3 million a year earlier. Investing activities provided $551.7 million, mainly from marketable-security maturities net of purchases; financing activities provided $16.9 million. Cash, cash equivalents and restricted cash were $1.000 billion at period-end.
Liquidity and debt: Cash, cash equivalents, restricted cash and short-term investments totaled approximately $1.8 billion. Short-term investments were $787.9 million. Convertible senior notes had a net carrying value of $1.139 billion and mature in January 2026; the notes bear 0.25% interest. Management said existing cash and investments should cover operating and capital needs for at least 12 months, while also noting continued operating losses and possible future negative operating cash flow.
Deferred revenue, current and non-current, was $398.2 million, compared with $375.2 million at January 31, 2022. Remaining performance obligations were $414.3 million; approximately 64% was expected to be recognized over the following 12 months.
Material changes versus the prior comparable period
- Revenue growth remained strong, while management reported that macroeconomic conditions slowed growth in existing Atlas applications.
- Atlas increased as a proportion of revenue. Management said infrastructure efficiencies supported subscription gross margin, despite the increasing Atlas mix and related hosting costs.
- Services gross margin remained negative: (28)% for the quarter and (31)% for the nine-month period, with management citing personnel costs and lower utilization.
- Net losses widened in both periods as sales and marketing and research and development costs increased. Nine-month stock-based compensation also rose by $102.0 million year over year.
- Cash used in operations increased to $38.8 million from $15.3 million for the nine-month period.
Outlook, commentary, risks and unusual items
- Outlook: The filing provides no specific numerical revenue or earnings guidance. Management expected macroeconomic conditions to continue negatively affecting revenue growth for the remainder of the fiscal year and expected higher business-travel, in-person-event and office-related costs compared with the prior year.
- Macroeconomic and demand risks: Management cited inflation, higher interest rates and slower or negative economic growth, and said these conditions had already slowed growth in existing Atlas applications. Revenue also depends on customer usage, renewals and expansion.
- Profitability and cost risks: The company has a $1.5 billion accumulated deficit and expects to continue incurring operating losses. It disclosed non-cancelable, multi-year cloud-capacity commitments that may require payment regardless of actual usage.
- Convertible-note disclosure inconsistency: Note 5 states the 2026 Notes’ conversion condition was not triggered and the notes were not convertible from November 1, 2022 through January 31, 2023. The risk-factor section says the condition was triggered and the notes were convertible during that same period. This inconsistency should be checked against the filed statements and any subsequent clarification.
- Legal matter: Realtime Data’s patent case was dismissed by the district court; the plaintiff appealed, and appellate oral argument had not been scheduled. The company said it was not aware of matters expected to have a material adverse effect, while noting that litigation can entail costs and management distraction.
- Investments: The company reported approximately $3.5 million of unrealized losses on U.S. Treasury securities and said it intended to hold them to maturity. Non-marketable securities totaled $9.3 million; such investments are illiquid and subject to valuation uncertainty and possible loss.
- Controls: Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of October 31, 2022; it reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Resolve the conflicting disclosure about whether the 2026 Notes were convertible from November 1, 2022 through January 31, 2023, and assess any potential cash settlement or dilution.
- Track Atlas consumption and growth in existing applications, particularly given management’s warning that macroeconomic conditions were slowing usage growth.
- Monitor operating cash burn, cloud-capacity commitments, and the company’s ability to fund continued investment from its reported liquidity.
- Assess the growth in stock-based compensation and its effect on reported losses and shareholder dilution.
- Review services gross-margin trends, cloud infrastructure costs, and the expense trajectory as headcount and in-person activity increase.
- Follow the Realtime Data appeal and any changes in the valuation or performance of non-marketable investments.