MongoDB, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended July 31, 2022. Unaudited results; amounts below are in U.S. dollars unless otherwise stated.
Business context and financial performance
MongoDB sells database subscriptions, principally MongoDB Atlas and MongoDB Enterprise Advanced, and also provides consulting and training. Subscription revenue was 96% of total revenue. Atlas-related revenue was 64% of Q2 revenue, up from 56% a year earlier. Management said growth in existing applications was negatively affected by the macroeconomic environment.
| Metric | Q2 FY23 | Q2 FY22 | Six months FY23 | Six months FY22 |
|---|---|---|---|---|
| Revenue | $303.7m (+53%) | $198.7m | $589.1m (+55%) | $380.4m |
| Subscription revenue | $291.6m (+52%) | $191.4m | $566.2m (+55%) | $366.0m |
| Gross profit / margin | $215.4m / 71% | $138.0m / 69% | $422.6m / 72% | $265.2m / 70% |
| Operating loss | $(114.8)m | $(72.5)m | $(190.8)m | $(134.0)m |
| Net loss | $(118.9)m | $(77.1)m | $(196.2)m | $(141.1)m |
| Net loss per share, diluted | $(1.74) | $(1.22) | $(2.88) | $(2.26) |
Higher revenue and gross profit were more than offset by increased operating expenses. Q2 sales and marketing expense rose 66% to $181.6m and research and development rose 49% to $108.0m. Six-month stock-based compensation was $180.1m, versus $108.6m in the prior-year period. Subscription gross margin improved, while services gross margin was negative, reflecting personnel costs and lower utilization.
Cash flow, liquidity and debt
- Cash, cash equivalents, restricted cash and short-term investments totaled approximately $1.8bn at July 31, 2022, including $651.4m cash and $1,144.2m short-term investments. Management said these resources should fund operating and capital needs for at least 12 months.
- Six-month operating cash flow was $(33.1)m, compared with $(9.5)m in the prior-year period. Investing cash flow was $196.1m, mainly reflecting net maturities of marketable securities; financing cash flow was $16.9m.
- Convertible senior notes had $1.150bn principal outstanding and a $1.138bn net carrying value; they bear 0.25% interest and mature in January 2026. The notes’ disclosed fair value was approximately $1.8bn.
- The notes became convertible at holders’ option from August 1 through October 31, 2022. Future conversions could require cash settlement unless the company elects to settle solely in shares, creating a potential liquidity and dilution consideration.
Changes, outlook and risks
- Revenue growth was driven primarily by direct-sales subscription customers. Customers numbered over 37,000, compared with over 29,000 a year earlier; customers with at least $100,000 in ARR or annualized MRR increased to 1,462 from 1,126. Net ARR expansion rate remained above 120%.
- Management expects to continue investing heavily in sales and marketing, research and development, and international operations rather than prioritize near-term profitability or cash flow. It expects operating losses and potentially negative operating cash flow to continue.
- Management expects macroeconomic conditions to continue to negatively affect revenue growth for the remainder of the year. It also expects higher travel, in-person event and office-related costs in fiscal 2023 as activities resume.
- Key risks include economic weakness, inflation and rising interest rates; slower customer usage, renewals or expansions; competition; dependence on third-party cloud providers; cybersecurity and privacy obligations; and ongoing operating losses. Results may fluctuate with usage-based Atlas revenue and contract timing.
- U.S. Treasury securities had approximately $4.6m of unrealized losses due to higher market interest rates; the company intends to hold them to maturity and does not expect to realize those losses. Non-marketable securities were $7.7m, subject to valuation uncertainty and potential loss.
- Realtime Data’s patent case remained on appeal after the district court dismissed the company’s case; appellate oral argument had not been scheduled. Management said it knew of no legal matters expected to have a material adverse effect.
- Management reported disclosure controls were effective at the reasonable-assurance level, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Atlas usage and customer expansion sustain growth despite management’s stated macroeconomic headwinds.
- Whether operating expense growth, stock-based compensation and cash use improve relative to revenue growth.
- How holders treat the convertible notes during the current conversion window and whether any settlement uses cash, shares or both.
- Whether cloud infrastructure costs, service utilization and Atlas revenue mix support gross margins over time.
- Developments in the Realtime Data appeal, non-marketable investment valuations and broader macroeconomic conditions.