MongoDB, Inc. — FY2018 Form 10-K
Reporting period: Fiscal year ended January 31, 2018. The filing also reports the quarter ended January 31, 2018 (FY2018 Q4). MongoDB sells database subscriptions, cloud-hosted MongoDB Atlas, and professional services; it combines a free developer edition with paid offerings. The company completed its IPO in October 2017.
Financial performance and liquidity
| Metric | FY2018 | FY2017 |
|---|---|---|
| Total revenue | $154.5 million | $101.4 million |
| Subscription revenue | $141.5 million | $91.2 million |
| Services revenue | $13.0 million | $10.1 million |
| Gross profit / margin | $111.7 million / 72% | $71.5 million / 71% |
| Operating loss | $(97.3) million | $(85.9) million |
| Net loss | $(96.4) million | $(86.7) million |
| Operating cash flow | $(44.9) million | $(38.1) million |
| Free cash flow (non-GAAP) | $(47.0) million | $(39.8) million |
| Cash, cash equivalents and short-term investments | $279.0 million | $116.5 million |
| Working capital | $200.9 million | $60.7 million |
Revenue grew 52% year over year; subscription revenue accounted for 92% of sales. Gross margin improved one percentage point, while operating expenses rose 33% to $208.9 million, led by sales and marketing expense of $110.0 million. Net losses have continued since inception; accumulated deficit was $443.8 million. The company reported no funded debt in the presented disclosures; total liabilities were $221.7 million, including deferred revenue and lease-related liabilities.
FY2018 Q4 revenue was $45.0 million, compared with $29.9 million in the year-earlier quarter; Q4 net loss was $26.4 million versus $21.8 million. Atlas generated 11% of Q4 revenue, up from 7% of full-year FY2018 revenue. At year-end, deferred revenue was $137.4 million, including current and non-current amounts.
Material changes and business developments
- Subscription revenue increased 55%; management attributed most of the dollar increase to existing customers, with $17.6 million of the increase from new customers.
- MongoDB Atlas expanded from 1% of revenue in FY2017 to 7% in FY2018. Atlas growth also increased cloud infrastructure costs; management warned that a higher Atlas mix could pressure subscription gross margin.
- Net ARR expansion exceeded 120% in each of the prior 12 fiscal quarters. Customers with at least $100,000 in ARR or annualized self-service MRR increased to 354 from 246.
- Sales and marketing expense increased 40%, R&D 20%, and general and administrative expense 36%, reflecting hiring, growth investment, and public-company costs.
- The October 2017 IPO raised $201.6 million net. Cash and short-term investments increased substantially, while operating cash use also increased.
Outlook, risks and unusual items
- Outlook: No quantified revenue or earnings guidance is provided. Management expects continued investment in sales, marketing, R&D, international expansion and Atlas, and expects operating losses and negative operating cash flows to continue. It stated existing cash and investments should fund operations and capital needs for at least 12 months.
- Commitments: Contractual obligations totaled $145.3 million, comprising $108.0 million of operating lease obligations and $37.3 million of purchase obligations. A cloud-provider arrangement includes a non-cancelable $36.0 million commitment over three years. A new New York office lease has estimated base rent of $87.9 million over 12 years.
- Leadership and execution: The company was replacing its Chief Revenue Officer and cautioned that the transition could disrupt sales execution. Rapid employee growth and scaling systems are also risks.
- Security and infrastructure: Industry reports described ransomware attacks on more than 80,000 MongoDB instances since January 2017, mostly Community Server deployments; the company attributed them to users not enabling recommended security settings. Atlas relies on third-party cloud providers, creating availability, cost and service-credit exposure.
- Accounting and tax: Adoption of the new revenue standard was expected to significantly reduce unearned subscription revenue; license revenue may be recognized upon delivery, but the full effect remained under evaluation. The Tax Act prompted provisional tax accounting and estimates that could change.
- Other investor risks: Strong competition from established database vendors and cloud providers; open-source licensing and intellectual-property exposure; customer renewal and conversion risk; and a dual-class structure giving Class B shares 10 votes each. Class B holders controlled approximately 97% of voting power at year-end.
Important facts for investors to verify
- Whether Atlas growth translates into durable, profitable recurring revenue as its share of sales and cloud hosting costs rise.
- Customer retention, ARR expansion, new-customer conversion and the trend in deferred revenue and receivables.
- Progress toward reducing operating losses and cash burn, including the impact of continued hiring and stock-based compensation.
- The actual financial-statement and comparability effects of adopting the new revenue recognition standard.
- Execution of the CRO replacement, cloud-provider commitments, and the new long-term office lease.
- Security controls and exposure from reported attacks, third-party cloud outages, and the concentration of voting control.