Software company MongoDB (MDB +6.29%) is attempting to disrupt the database industry with its namesake product. Based on its third-quarter results, it's having some success doing just that. Revenue soared as MongoDB's database-as-a-service offering experienced tremendous growth, while losses also jumped as the company spends big to make sales.
Here's what you need to know about MongoDB's third-quarter report.
1. MongoDB beat expectations
MongoDB has a history of besting Wall Street's projections, and the third quarter was no exception. Both revenue and adjusted earnings came in ahead of estimates, leading the stock to jump on Tuesday morning.
|
Metric |
Q3 2019 |
Change (YOY) |
Compared to Average Analyst Estimate |
|---|---|---|---|
|
Revenue |
$109.4 million |
52% |
Beat by $12 million |
|
Non-GAAP (adjusted) earnings per share |
($0.26) |
N/A |
Beat by $0.02 |
Data source: MongoDB. YOY = year over year.
Subscription revenue accounted for almost all of the company's revenue, growing 56% to $103.8 million. Services revenue was up 8% to $5.6 million.
MongoDB also exceeded analyst expectations for its revenue guidance. The company expects to produce fourth-quarter revenue between $109 million and $111 million, and full-year revenue between $407.2 million and $409.2 million. Those ranges compare to consensus analyst estimates of $105.6 million and $394.2 million, respectively.
"MongoDB's terrific third quarter results are the latest example of how the powerful combination of our modern data platform and sophisticated go-to-market efforts are driving increased adoption by both new and existing customers," said MongoDB CEO Dev Ittycheria.
Image source: MongoDB.
2. Atlas is growing fast
The key growth driver for MongoDB is Atlas, the company's cloud-based database-as-a-service offering. While MongoDB's database software is open-source and can be run anywhere, Atlas removes much of the overhead of database management.
Atlas accounted for 40% of MongoDB's third-quarter revenue, growing by a staggering 185% year over year. Atlas now has around 14,200 customers and has reached an annual revenue run rate of $175 million.
MongoDB doesn't provide the cloud infrastructure to run Atlas itself, instead relying on Amazon Web Services, Microsoft Azure, and Google Cloud. Free from having to build out its own data centers to support Atlas, the company can rapidly scale its database-as-a-service product.
3. MongoDB is losing lots of money
All this growth doesn't come free. Through the first nine months of the year, MongoDB has posted a GAAP net loss of $113 million. The company lost $42.4 million in the third quarter alone. MongoDB's adjusted earnings, which treat stock-based compensation as if it wasn't a real expense, are also deeply negative.
Atlas adoption is impressive, but MongoDB is spending heavily to make those sales. Sales and marketing spending jumped 58% in the third quarter, eating up a bit more than half of the company's revenue. Spending growing faster than sales isn't uncommon for subscription software companies, but it does make it difficult to tell whether these sales will pay off in the long run.
MongoDB's guidance makes clear that big losses will continue. The company expects to lose between $0.27 and $0.29 per share on an adjusted basis in the fourth quarter, worse than the $0.17-per-share loss reported in the prior-year period. For the full year, MongoDB sees an adjusted loss between $1.02 and $1.04 per share, compared to a loss of $1 per share in the previous fiscal year.
MongoDB is worth more than $7 billion, so investors are valuing the company based on growth potential, not the current fundamentals. But eventually, MongoDB will need to turn a profit selling its database software.
