MongoDB, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended April 30, 2018; comparison is with the three months ended April 30, 2017. Unaudited results.
Business context and performance
MongoDB sells database subscriptions and related services, including its cloud-hosted MongoDB Atlas offering. Management said it intends to invest heavily in growth rather than prioritize near-term profitability or cash flow.
- Revenue was $48.2 million, up 49% year over year. Subscription revenue rose 53% to $44.6 million; services revenue rose 14% to $3.7 million.
- MongoDB Atlas generated 14% of total revenue. The company reported more than 6,600 customers, including more than 4,400 Atlas customers, at quarter-end.
- Gross profit was $34.5 million; gross margin was 71.5%, essentially unchanged from 71.6%. Subscription gross margin was 77.4%; services gross margin was negative 0.6%, which management attributed to staffing investments and timing of services revenue.
- Operating expenses were $63.8 million, up 48%. Operating loss was $29.3 million, versus $19.8 million; net loss was $29.2 million, versus $19.7 million. Basic and diluted loss per share was $0.58, compared with $1.50, with the per-share comparison affected by the larger weighted-average share count following the IPO.
Cash, liquidity and balance sheet
- Cash, cash equivalents, short-term investments and restricted cash totaled $271.5 million at April 30, 2018. Total liabilities were $227.7 million and stockholders’ equity was $172.5 million. The balance sheet does not list borrowings or other financial debt.
- Operating cash flow was negative $8.0 million; capital expenditures were $0.4 million and reported non-GAAP free cash flow was negative $8.4 million. Both cash-use measures improved from the prior-year quarter.
- Cash and restricted cash increased $49.7 million during the quarter, largely because $58.0 million of marketable securities matured; this was principally a shift in investment holdings, not operating cash generation.
- Management said existing cash and investments should fund operating and capital needs for at least 12 months, while noting expected future operating losses and negative operating cash flows. No numerical revenue or earnings guidance was provided.
Material changes, outlook and risks
- Growth reflected new and existing customers; management attributed $9.6 million of subscription revenue growth to new customers. Sales and marketing headcount increased 36%, research and development headcount 35%, and general and administrative headcount 37% year over year.
- Management expects operating expenses to rise as it expands sales, marketing, research and development, and international operations. It also warned that increasing Atlas contribution may pressure gross margin because of cloud-hosting costs.
- The company was assessing adoption of the new revenue recognition standard and expected unearned subscription revenue to decline significantly. It anticipated recognizing the software-license portion of some contracts upon delivery, potentially increasing financial-statement fluctuations; the assessment was preliminary.
- Operating leases for office space extend through 2029. The company reported no legal matters it believed would have a material adverse effect and no material changes to the risk factors in its latest annual report.
- Class B shares carry 10 votes per share, compared with one vote per Class A share. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether subscription and Atlas growth persist, and how customer expansion and renewals develop.
- Whether Atlas hosting costs and services staffing investments affect gross margins, and whether operating losses and cash use narrow.
- The eventual revenue-standard adoption date and its effects on reported revenue, deferred revenue and period-to-period variability.
- Cash runway against planned spending, future financing needs, and dilution from equity compensation and the dual-class share structure.