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MongoDB's Accelerated Growth Again Fueled by Atlas

By Simon Erickson - Sep 7, 2018 at 1:55PM

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It was yet another quarter of 400% annual revenue growth for Mongo's database-as-a-service offering, which could help explain why the stock is up more than 150% year to date.

The world's need for databases is changing. No longer used for just calculating and tabulating transactions, databases now are being asked to manage the information that comes from things like weblogs of internet traffic, free-form texts from customers, and sensor readings from Internet of Things devices.

MongoDB ( MDB -6.53% ) exists to help with this. Mongo's databases are not only more flexible, but are also open source -- meaning developers can contribute business-specific applications to support them.

As the commercial world transitions its business and its data to the cloud, MongoDB's databases have been surging in popularity. The company's exponential growth rate also has attracted the attention of forward-looking investors, and its stock price is up nearly 150% so far in 2018.

The company recently reported its second-quarter results. Let's take a closer look to see if MongoDB's good times are likely to continue.

Person looking at data and charts on a laptop.

Image source: Getty Images.

MongoDB results: The raw numbers

Metric Fiscal Q2 2019 Fiscal Q2 2018 Year-Over-Year Change
Revenue $57.5 million $35.6 million 61%
Operating income ($30.6 million) ($26.2 million) N/A
Adjusted earnings per share ($0.41) ($0.52) N/A

DATA SOURCE: MONGODB.

What happened with MongoDB this quarter?

MongoDB's strong customer growth again caused its top-line revenue to surge. 

  • Revenue increased by 61%, driven by a 63% increase in subscription revenue, to $52.9 million. The top-line growth rate is accelerating, as there was a 53% increase in subscription revenue last quarter. 
  • Gross margin was 71%, which is unchanged from last year. 
  • Atlas -- which is Mongo's database-as-a-service offering -- continued to shine. Atlas added 1,000 new customers and grew revenue 400% year over year. Atlas now accounts for 18% of total revenue, compared to only 5% a year ago.
  • The company ended the quarter with 7,400 customers, which is 72% more than a year ago. New customer wins included Canon USA and cryptocurrency wallet Coinbase.
  • Mongo issued $254 million in net proceeds from a convertible debt offering.
  • The company's net annual recurring revenue-expansion rate, which compares subscription revenues today to those from the same customers one year ago, was above 120% for the 14th consecutive quarter.

What management had to say

President and CEO Dev Ittycheria elaborated on what exactly is driving Mongo's accelerated growth:

We are seeing strong demand from both new and existing customers across a growing number of use cases, as evidenced by our 63% subscription revenue growth, demonstrating that MongoDB is quickly becoming the modern database platform of choice.

We pushed the pace of innovation with the release of MongoDB 4.0 and are excited about the introduction of new enterprise security features into MongoDB Atlas, our fully managed cloud database service, and the general availability of MongoDB Stitch, our serverless platform. Our investments in expanding engineering and go-to-market capabilities have positioned MongoDB to continue delivering high levels of growth as we disrupt the massive database market.

Looking forward

Customers are migrating their data and software applications to the cloud, which has been extremely beneficial to MongoDB and Atlas.

Atlas already provides elastic capacity, which means customers won't crash their sites if they see a spike in usage and traffic (as is often the case for internet-delivered software applications). The company continues to dedicate resources to Atlas, such as encryption key management for security and LDAP (Lightweight Directory Access Protocol) integration to simplify logins and automate simple tasks. Atlas also is now HIPAA-compliant, which should expand sales into the healthcare industry.

Management raised full-year revenue guidance to $229 million (up from $218.5 million last quarter) and reaffirmed an expected net loss of ($1.64) per share. MongoDB still is losing money, but it's general-purpose databases are gaining market adoption at full steam. Investors will watch for the business to scale and eventually capture profits.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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