Like many growth stocks, MongoDB (MDB +0.54%) is pumping its profits into growth efforts. It's spending money with its marketing and sales teams to capture new customers and on product improvements with its research and development organization. Most of the time, this investment results in negative cash flow, but not in this cloud database specialist's latest quarter. On a Fool Live episode recorded on June 16, Fool contributors Toby Bordelon and Brian Stoffel discuss recent results and why investors shouldn't expect improved cash flow going forward.
Brian Stoffel: That's MongoDB, ticker symbol M-D-B. MongoDB offers tools that help companies organize data, particularly data that doesn't fit nicely in spreadsheets, which I find annoying because I like spreadsheets, but we still need that in today's day and age.
They came out with their first-quarter earnings: revenue up 39 percent, subscription revenue up 40 percent. Atlas, which is its cloud database-as-a-service tool -- it was launched about five years ago -- it grew 71 percent and it now accounts for over half of revenue. That's a remarkable trajectory for a product that is relatively new. Total number of customers was up 46 percent. Customers paying over $100,000 a year on average, up 36 percent. This is their key metric to look for, is their net annual recurring revenue expansion rate, which basically means their subscription expansion rate, was over 120 percent.
They are calling for 32 percent growth both for the next quarter and for the full year, and free cash flow swung from an $8.5 million loss during last year's first quarter to an $8.5 million gain during this year's first quarter, which is important because the company is not free-cash-flow positive normally, and that's what I got.
Toby Bordelon: That's great, Brian, I think my favorite part of what you said there was the free cash flow swing from negative to positive. I think that's the knock on some of these SaaS [software as a service] companies: high-growth rates, but not actually making any money at the end of day. So what do we think? Is this just a temporary fluke here with its positive cash flow or is this sustainable? You think we're going to see it for the full year, some free-cash-flow positive stuff?
Brian Stoffel: I don't, sadly. There's a good reason for that, but I also have good reason for believing that it won't happen because on their conference call they said, "Despite the stronger than expected first quarter, we continue to expect that we will burn cash in the full fiscal year 2022 as we continue to invest significantly in the business."
So there you go. I think that's your answer right there. They won't, but they have a manageable debt load. They can definitely raise funds via a secondary offering. I mean, this stock has just been on a crazy run. So if they needed to, they could. I'm not concerned. There's a huge opportunity they're after. But I, like you, agree that it would be nice if they were free cash flow positive.
Toby Bordelon: Good to know. I guess I'll put my hopes into 2023 for some more nice cash.
Brian Stoffel: Yup.
