Twenty years ago, databases were designed with the enterprise in mind. Transactional information such as banking deposits, customer orders, or inventory management was very structured, and typically fit nicely into rows and columns.
The world's data has not only increased, but also changed significantly since then. Weblogs now track the ways users interact with your website. Social media posts are capturing customer feedback. There's a treasure trove of unstructured data out there that companies would like to make sense of.
MongoDB (NASDAQ:MDB) was created to address the world's changing data formats. It is a key provider of general-purpose databases, which are flexible in order to help companies better analyze and understand different types of information. And because they are open-source, they allow developers to build free, business-specific applications on top of them. Customers can now look to the larger community for solutions to solve their specific problems.
MongoDB's databases first caught on with smaller, web-based businesses. But as the company's first-quarter results -- released this week -- demonstrated, we're beginning to see larger enterprise customers also take notice of MongoDB's disruptive innovation.
MongoDB results: The raw numbers
|Metric||Fiscal Q1 2019||Fiscal Q1 2018||Year-Over-Year Change|
|Revenue||$48.2 million||$32.4 million||49%|
|Operating income||($29.3 million)||($19.8 million)||N/A|
|Adjusted earnings per share||($0.43)||($0.38)||N/A|
What happened with MongoDB this quarter?
MongoDB continues to operate unprofitably, but its strong top-line growth shows signs of scalability.
- Subscription revenue increased 53% to $44.6 million, while services revenue was up 14% to $3.7 million. This was yet another quarter of strong top-line growth.
- The company's recent MongoDB Atlas initiative (which is a database-as-a-service) continues to grow significantly. Atlas revenue was up more than 400% and added more than 1,000 customers during the quarter. Even though it has only been available for less than two years, Atlas already has 4,400 customers and accounts for 14% of total revenue.
- MongoDB's total customer count reached 6,600, which is up 83% over last year.
- Gross margin remained unchanged at 71.5%, but the company still continues to report heavy operating losses. As I noted last quarter, MongoDB will need to decrease its sales, marketing, and research and development expenses as a percentage of total sales in order to reach profitability.
- The net annual recurring revenue expansion rate -- which compares subscription revenues today to those from the same customers one year ago -- was once again above 120%.
What management had to say
In the earnings call, President and CEO Dev Ittycheria described what drove the company's strong first-quarter results: "We saw a healthy mix of new logo wins and strong upsell activity, both of which include the customers' migrating workloads from legacy databases to MongoDB. Our performance in the first quarter exemplified the power of our land, expand and expand model and our multiple vectors of growth."
He also elaborated on the opportunity for Atlas with larger, corporate customers:
We also continue to see tremendous customer interest in Atlas. In the first quarter, Atlas represented 14% of revenue versus 4% a year ago and 11% last quarter. A fast-growing percentage of this business is coming through our direct sales efforts, though self-serve is still the majority of Atlas sales. Atlas is a key part of our "run anywhere" strategy, and its success among enterprise customers makes it clear that Atlas is not only great for small- and medium-sized businesses but is also compelling solution for the largest organizations in the world. We anticipate field sales of Atlas will continue to increase as we introduce Enterprise Advanced features and more into Atlas starting later this year.
Atlas has been driving MongoDB's growth, and its expansion into the enterprise could be the key to reporting positive margin. Its open-source, general-purpose databases are receiving a warm customer reception, and investors will look to see if the company's growth can continue during the rest of 2018.