The world's need for databases is changing.
With the rise of social networks, e-commerce sites, and the Internet of Things, databases now need to be able to manage more complex forms of information, such as free-form text posted by users, purchaser product reviews, or unstructured data captured by device sensors.
MongoDB (NASDAQ:MDB) exists to help companies capture these new data sets. Mongo's general-purpose databases are more flexible and are open-source, meaning developers can build business-specific applications on top of them.
MongoDB has also been popular with investors, with a stock that has nearly tripled in 2018. Much of this optimism could be related to the incredible success of its Atlas platform, which has quadrupled its revenue contribution over last year.
The company recently reported its third-quarter results. Let's take a closer look to see what's driving MongoDB's impressive performance.
MongoDB results: The raw numbers
|Metric||Fiscal Q3 2019||Fiscal Q3 2018||Year-Over-Year Change|
|Revenue||$65.0 million||$41.5 million||57%|
|Operating income||($29.1 million)||($24.1 million)||N/A|
|Adjusted earnings per share||($0.30)||($0.44)||N/A|
What happened with MongoDB this quarter?
MongoDB's strong customer adoption caused its top line to once again grow significantly.
- Revenue grew 57%, driven by a 59% increase in subscription revenue to $60.1 million.
- Gross margin was 73%, which is unchanged from last year.
- Atlas -- which is MongoDB's database-as-a-service offering -- grew revenue by more than 300% over last year. Atlas now accounts for 22% of total revenue, compared to only 8% a year ago. Several of the company's wins with Atlas came overseas, where it recently added its first new customers in Argentina and in South Korea. Atlas now has 6,200 customers.
- Overall, MongoDB has 8,300 customers, 69% higher than the 4,900 it had a year ago and 900 greater than the 7,400 it had at the end of last quarter.
- Of those, 490 customers (6% of the total) contribute at least $100,000 of annual recurring revenue. This is up from 320 six-figure customers in the year-ago period.
- MongoDB is building upon Atlas with the acquisition of mLab, which closed on Nov. 1. Management describes mLab as "a pioneer in the database-as-a-service market since its founding seven years ago" that "has been particularly successful focusing on developer-centric start-up communities via self-serve model."
- Chief Financial Officer Michael Gordon will now also serve as the company's COO. This is a newly created position.
- The company's net annual recurring revenue expansion rate, which compares subscription revenue today to revenue from the same customers one year ago, was above 120% for the 15th consecutive quarter.
What management had to say
President and CEO Dev Ittycheria believes that MongoDB's excellent growth rates still have plenty of room to run in their expanding addressable market:
Our ability to generate best-in-class growth at significant scale, which now exceeds $0.25 billion revenue run rate, reflects our strengthening position as the next-generation database platform of choice.
We serve one of the largest markets in enterprise software. IDC now forecasts that the database market is $59 billion in size in 2018, growing to $84 billion in 2022 reflecting a 9% compound annual growth rate. We believe MongoDB is uniquely positioned to capture growing share of this market given the power of MongoDB's sophisticated document model, large developer mindshare, and compelling customer proof points across nearly every industry and geography.
MongoDB's $65 million of quarterly revenue exceeded even the high end of its internal guidance. Several of the wins this quarter were with customers in what Ittycheria describes as "traditionally conservative industries," such as tax payments and customs, a vertically integrated energy company, and the Maryland Health Exchange. This suggests that MongoDB is successfully winning share not just with early adopters, but now in the mass market as well. Investors will watch to see if the database market does in fact grow to $84 billion by 2022.
The company will look to translate its accelerated top-line growth into bottom-line profits. MongoDB again lost money on both an operating and net basis, though its operating margin contracted from (44%) last year to (26%) today. The balance sheet still has $523 million in cash, and free cash flow was negative $10 million during the quarter. The company appears to have plenty of cash available for it to continue to invest in its growth opportunity.
Management issued full-year revenue guidance of $243.7 million to $244.7 million (up from $229 million forecast last quarter) and a net loss of $1.53 to $1.52 per share (an improvement from the $1.64-per-share loss expected last quarter). This guidance includes the contribution from the acquisition of mLab, which it expects to generate $5 million of revenue in the fourth quarter. MongoDB is honoring the existing pricing for mLab's customers, and the company also anticipates a modest amount of churn from customers who don't want to switch to the Atlas platform.