Unless the context otherwise indicates, references in this report to the terms
"MongoDB," "the Company," "we," "our" and "us" refer to MongoDB, Inc., its
divisions and its subsidiaries. The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with
(1) our interim unaudited condensed consolidated financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (2)
the audited consolidated financial statements and the related notes and the
discussion under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our Annual Report on Form 10-K
for the fiscal year ended January 31, 2022 (the "2022 Form 10-K"). All
information presented herein is based on our fiscal calendar year, which ends
January 31. Unless otherwise stated, references to particular years, quarters,
months or periods refer to our fiscal years ended January 31 and the associated
quarters, months and periods of those fiscal years.
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements are often identified by the use
of words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "plan," "project," "will," "would" or the negative or
plural of these words or similar expressions or variations, including our
expectations regarding our future growth opportunity, revenue and revenue
growth, investments, strategy, operating expenses and the anticipated impact of
the global economic uncertainty and financial market conditions, caused by the
COVID-19 pandemic and the macroeconomic environment, on our business, results of
operations and financial condition. Such forward-looking statements are subject
to a number of risks, uncertainties, assumptions and other factors that could
cause actual results and the timing of certain events to differ materially from
future results expressed or implied by the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those identified herein, and those discussed in the section titled "Risk
Factors," set forth in Part 2, Item 1A of this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future
events. Furthermore, such forward-looking statements speak only as of the date
of this report. Except as required by law, we undertake no obligation to update
any forward-looking statements to reflect events or circumstances after the date
of such statements.
Our corporate website is located at www.mongodb.com. We make available free of
charge, on or through our corporate website, our annual, quarterly and current
reports, and any amendments to those reports, as soon as reasonably practicable
after electronically filing such reports with, or furnishing such reports to,
the Securities and Exchange Commission ("SEC"). Information contained on our
corporate website is not part of this Quarterly Report on Form 10-Q or any other
report filed with or furnished to the SEC.
Overview
MongoDB is the leading modern, general purpose database platform. Our robust
platform enables developers to build and modernize applications rapidly and
cost-effectively across a broad range of use cases. Organizations can deploy our
platform at scale in the cloud, on-premise, or in a hybrid environment. Through
our unique document-based architecture, we are able to address the needs of
organizations for performance, scalability, flexibility and reliability while
maintaining the strengths of legacy databases. Software applications continue to
redefine how organizations across industries engage with their customers,
operate their businesses and compete with each other. A database is at the heart
of every software application. As a result, selecting a database is a highly
strategic decision that directly affects developer productivity, application
performance and organizational competitiveness. Our platform addresses the
performance, scalability, flexibility and reliability demands of modern
applications while maintaining the strengths of legacy databases. Our business
model combines the developer mindshare and adoption benefits of open source with
the economic benefits of a proprietary software subscription business model.
MongoDB is headquartered in New York City and our total headcount increased to
4,534 as of October 31, 2022, from 3,223 as of October 31, 2021.
We generate revenue primarily from sales of subscriptions, which accounted for
96% of our total revenue for each of the three and nine months ended October 31,
2022 and October 31, 2021.
MongoDB Atlas is our hosted multi-cloud database-as-a-service ("DBaaS") offering
that includes comprehensive infrastructure and management, which we run and
manage in the cloud. During the three and nine months ended October 31, 2022,
MongoDB Atlas revenue represented 63% and 62%, respectively, as compared to 58%
and 55% of our total revenue during the three and nine months ended October 31,
2021, respectively, reflecting the continued growth of MongoDB Atlas since its
introduction in June 2016. We have experienced strong growth in self-serve
customers of MongoDB Atlas. These
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customers are charged monthly in arrears based on their usage. In addition, we
have also seen growth in MongoDB Atlas customers sold by our sales force. These
customers typically sign annual contracts and pay in advance or are invoiced
monthly in arrears based on usage.
MongoDB Enterprise Advanced is our proprietary commercial database server
offering for enterprise customers that can run in the cloud, on-premise or in a
hybrid environment. MongoDB Enterprise Advanced revenue represented 29% and 30%
of our subscription revenue for the three and nine months ended October 31,
2022, respectively, and 34% and 36% of our subscription revenue for the three
and nine months ended October 31, 2021, respectively. We sell subscriptions
directly through our field and inside sales teams, as well as indirectly through
channel partners. The majority of our subscription contracts are one year in
duration and are invoiced upfront. When we enter into multi-year subscriptions,
we typically invoice the customer on an annual basis.
Many of our enterprise customers initially get to know our software by using
Community Server, which is our free-to-download version of our database that
includes the core functionality developers need to get started with MongoDB
without all the features of our commercial platform. Our platform has been
downloaded from our website more than 325 million times since February 2009 and
over 115 million times in the last 12 months alone. We also offer a free tier of
MongoDB Atlas, which provides access to our hosted database solution with
limited processing power and storage, as well as certain operational
limitations. As a result, with the availability of both Community Server and
MongoDB Atlas free tier offerings, our direct sales prospects are often familiar
with our platform and may have already built applications using our technology.
A core component of our growth strategy for MongoDB Atlas and MongoDB Enterprise
Advanced is to convert developers and their organizations who are already using
Community Server or the free tier of MongoDB Atlas to become customers of our
commercial products and enjoy the benefits of either a self-managed or hosted
offering.
We also generate revenue from services, which consist primarily of fees
associated with consulting and training services. Revenue from services
accounted for 4% of our total revenue for each of the three and nine months
ended October 31, 2022 and October 31, 2021. We expect to continue to invest in
our services organization as we believe it plays an important role in
accelerating our customers' realization of the benefits of our platform, which
helps drive customer retention and expansion.
We believe the market for our offerings is large and growing. According to IDC,
the worldwide database software market, which it refers to as the data
management software market, is forecast to be approximately $84 billion in 2022
growing to approximately $138 billion in 2026, representing a 13% compound
annual growth rate. We have experienced rapid growth and have made substantial
investments in developing our platform and expanding our sales and marketing
footprint. We intend to continue to invest to grow our business to take
advantage of our market opportunity.
Impact of the COVID-19 Pandemic and Macroeconomic Conditions
The COVID-19 pandemic has impacted the United States ("U.S.") and the world. The
full extent of the impact of the COVID-19 pandemic on our future operational and
financial performance will depend on certain developments, including the
duration and spread of the outbreak and the impact of new variants of the virus
that cause COVID-19; the public health measures taken by authorities and other
entities to contain and treat COVID-19; and the impact of the COVID-19 pandemic
on the global economy and on our current and prospective customers, employees,
vendors and other parties with whom we do business, all of which are uncertain
and cannot be predicted.
In 2020, we adopted several measures in response to the COVID-19 pandemic,
including temporarily requiring employees to work remotely, suspending
non-essential travel by our employees, and replacing in-person marketing events
(including our annual developer conference) with virtual events. In 2021, we
began to re-open our offices in the United States and certain other locations
globally for employees to voluntarily return. Business travel also resumed
during 2021 on a voluntary basis and we started to hold in-person marketing
events. In April 2022, we moved forward with our return to office plan, which
encompasses a hybrid approach to in-office attendance based on the different
needs of teams across the company. During 2022, we experienced an increase in
business travel, in-person marketing events, and office-related costs. We expect
these and other costs to increase during the year ended January 31, 2023 and
result in higher charges compared to the prior year.
We are also impacted by adverse macroeconomic conditions, including slower or
negative economic growth, higher inflation and higher interest rates. During the
three and nine months ended October 31, 2022, the macroeconomic environment
negatively impacted our business. For instance, we experienced slower than
historical growth of our existing Atlas applications.
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We continue to monitor the developments of the COVID-19 pandemic and the
macroeconomic environment on our business and we may adjust our business
practices accordingly. For further discussion of the potential impacts of the
COVID-19 pandemic and the macroeconomic environment on our business, operating
results, and financial condition, see the section titled "Risk Factors" included
in Part II, Item 1A of this Quarterly Report on Form 10-Q. Other factors
affecting our performance are discussed below, although we caution you that the
COVID-19 pandemic may also impact these factors.
Key Factors Affecting Our Performance
Growing Our Customer Base and Expanding Our Global Reach
We are intensely focused on continuing to grow our customer base. We have
invested, and expect to continue to invest, in our sales and marketing efforts
and developer community outreach, which are critical to driving customer
acquisition. As of October 31, 2022, we had over 39,100 customers across a wide
range of industries and in over 100 countries, compared to over 31,000 customers
as of October 31, 2021. All affiliated entities are counted as a single customer
and our definition of "customer" excludes users of our free offerings.
As of October 31, 2022, we had over 5,900 customers that were sold through our
direct sales force and channel partners, as compared to over 3,900 such
customers as of October 31, 2021. These customers, which we refer to as our
Direct Sales Customers, accounted for 87% of our subscription revenue for both
the three and nine months ended October 31, 2022 and 85% and 84% of our
subscription revenue for the three and nine months ended October 31, 2021,
respectively. The percentage of our subscription revenue from Direct Sales
Customers increased during both the three and nine months ended October 31,
2022, in part due to existing self-serve customers of MongoDB Atlas becoming
Direct Sales Customers. We are also focused on increasing the number of overall
MongoDB Atlas customers as we emphasize the on-demand scalability of MongoDB
Atlas by allowing our customers to consume the product with minimal commitment.
We had over 37,600 MongoDB Atlas customers as of October 31, 2022 compared to
over 29,500 as of October 31, 2021. The growth in MongoDB Atlas customers
included new customers to MongoDB and existing MongoDB Enterprise Advanced
customers adding incremental MongoDB Atlas workloads.
In an effort to expand our global reach, in October 2019, we announced a
partnership with Alibaba Cloud to offer an authorized MongoDB-as-a-service
solution allowing customers of Alibaba Cloud to use this managed offering from
their data centers globally. We expanded our reach in China in February 2021
when we announced the launch of a global partnership with Tencent Cloud that
allows customers to easily adopt and use MongoDB-as-a-Service across Tencent's
global cloud infrastructure.
Increasing Adoption of MongoDB Atlas
MongoDB Atlas, our hosted multi-cloud offering, is an important part of our
run-anywhere strategy. To accelerate the adoption of this database-as-a-service
offering, we provide tools to easily migrate existing users of our Community
Server offering to MongoDB Atlas. We have also expanded our introductory
offerings for MongoDB Atlas, including a free tier, which provides limited
processing power and storage in order to drive usage and adoption of MongoDB
Atlas among developers. Our MongoDB Atlas free tier offering is available on all
three major cloud providers (Amazon Web Services ("AWS"), Google Cloud Platform
("GCP") and Microsoft Azure) in North America, Europe and Asia Pacific. In
addition, MongoDB Atlas is available on AWS Marketplace, making it easier for
AWS customers to buy and consume MongoDB Atlas. Our business partnership with
GCP provides deeper product integration and unified billing for GCP customers
who are also MongoDB Atlas customers and offers GCP customers a seamless
integration between MongoDB Atlas and GCP. The availability of MongoDB Atlas on
the Microsoft Azure Marketplace offers unified billing for joint customers of
MongoDB Atlas and Microsoft and makes it easier for established Azure customers
to purchase and use MongoDB Atlas.
We have also expanded the functionality available in MongoDB Atlas beyond that
of our Community Server offering. We expect this will drive further adoption of
MongoDB Atlas as companies migrate mission-critical applications to the public
cloud. The enterprise capabilities that we have introduced to MongoDB Atlas
include advanced security features, enterprise-standard authentication and
database auditing. We have invested significantly in MongoDB Atlas and our
ability to drive the adoption of MongoDB Atlas is a key component of our growth
strategy.
Retaining and Expanding Revenue from Existing Customers
The economic attractiveness of our subscription-based model is driven by
customer renewals and increasing existing customer subscriptions over time,
referred to as land-and-expand. We believe that there is a significant
opportunity to drive
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additional sales to existing customers, and expect to invest in sales and
marketing and customer success personnel and activities to achieve additional
revenue growth from existing customers. If an application grows and requires
additional capacity, our customers increase their usage of our platform. Growth
of an application is impacted by a number of factors including the macroeconomic
environment. During the three and nine months ended October 31, 2022, we believe
we experienced a negative impact from the macroeconomic environment on the
growth of existing Atlas applications, which affected our revenue growth. We
expect the macroeconomic environment to continue to negatively impact our
revenue growth for the remainder of the year. In addition, our customers expand
their subscriptions to our platform as they migrate additional existing
applications or build new applications, either within the same department or in
other lines of business or geographies. Also, as customers modernize their
information technology infrastructure and move to the cloud, they may migrate
applications from legacy databases. Our goal is to increase the number of
customers that standardize on our database within their organization. Over time,
the subscription amount for our typical Direct Sales Customer has increased.
We calculate annualized recurring revenue ("ARR") and annualized monthly
recurring revenue ("MRR") to help us measure our subscription revenue
performance. ARR includes the revenue we expect to receive from our customers
over the following 12 months based on contractual commitments and, in the case
of Direct Sales Customers of MongoDB Atlas, by annualizing the prior 90 days of
their actual consumption of MongoDB Atlas, assuming no increases or reductions
in their subscriptions or usage. For all other customers of our self-serve
products, we calculate annualized MRR by annualizing the prior 30 days of their
actual consumption of such products, assuming no increases or reductions in
usage. ARR and annualized MRR exclude professional services. The number of
customers with $100,000 or greater in ARR and annualized MRR was 1,545 and 1,201
as of October 31, 2022 and 2021, respectively. Our ability to increase sales to
existing customers will depend on a number of factors, including customers'
satisfaction or dissatisfaction with our products and services, competition,
pricing, economic conditions or overall changes in our customers' spending
levels.
We also examine the rate at which our customers increase their spend with us,
which we call net ARR expansion rate. We calculate net ARR expansion rate by
dividing the ARR at the close of a given period (the "measurement period"), from
customers who were also customers at the close of the same period in the prior
year (the "base period"), by the ARR from all customers at the close of the base
period, including those who churned or reduced their subscriptions. For Direct
Sales Customers included in the base period, measurement period or both such
periods that were self-serve customers in any such period, we also include
annualized MRR from those customers in the calculation of the net ARR expansion
rate. Our net ARR expansion rate has consistently been over 120% demonstrating
our ability to expand within existing customers.
Components of Results of Operations
Revenue
Subscription Revenue. Our subscription revenue is comprised of term licenses and
hosted as-a-service solutions. Subscriptions to term licenses include technical
support and access to new software versions on a when-and-if available basis.
Revenue from our term licenses is recognized upfront for the license component
and ratably for the technical support and when-and-if available update
components. Associated contracts are typically billed annually in advance.
Revenue from our hosted asaservice solutions is primarily generated on a usage
basis and is billed either in arrears or paid upfront. The majority of our
subscription contracts are one year in duration. When we enter into multi-year
subscriptions, we typically invoice the customer on an annual basis. Our
subscription contracts are generally non-cancelable and non-refundable.
Services Revenue. Services revenue is comprised of consulting and training
services and is recognized over the period of delivery of the applicable
services. We recognize revenue from services agreements as services are
delivered.
We expect our revenue may vary from period to period based on, among other
things, the timing and size of new subscriptions, customer usage patterns, the
proportion of term license contracts that commence within the period, the rate
of customer renewals and expansions, delivery of professional services, the
impact of significant transactions and seasonality of or fluctuations in usage
for our consumptionbased customers.
Cost of Revenue
Cost of Subscription Revenue. Cost of subscription revenue primarily includes
third-party cloud infrastructure expenses for our hosted as-a-service solutions.
We expect our cost of subscription revenue to increase in absolute dollars as
our subscription revenue increases and, depending on the results of MongoDB
Atlas, our cost of subscription revenue may increase as a percentage of
subscription revenue as well. Cost of subscription revenue also includes
personnel costs, including salaries, bonuses and benefits and stock-based
compensation, for employees associated with our subscription arrangements
principally related to technical support and allocated shared costs, as well as
depreciation and amortization.
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Cost of Services Revenue. Cost of services revenue primarily includes personnel
costs, including salaries, bonuses and benefits, and stockbased compensation,
for employees associated with our professional service contracts, as well as,
travel costs, allocated shared costs and depreciation and amortization. We
expect our cost of services revenue to increase in absolute dollars as our
services revenue increases.
Gross Profit and Gross Margin
Gross Profit. Gross profit represents revenue less cost of revenue.
Gross Margin. Gross margin, or gross profit as a percentage of revenue, has been
and will continue to be affected by a variety of factors, including the average
sales price of our products and services, the mix of products sold, transaction
volume growth and the mix of revenue between subscriptions and services. We
expect our gross margin to fluctuate over time depending on the factors
described above and, to the extent MongoDB Atlas revenue increases as a
percentage of total revenue, our gross margin may decline as a result of the
associated hosting costs of MongoDB Atlas.
Operating Expenses
Our operating expenses consist of sales and marketing, research and development
and general and administrative expenses. Personnel costs are the most
significant component of each category of operating expenses. Operating expenses
also include travel and related costs and allocated overhead costs for
facilities, information technology and employee benefit costs.
Sales and Marketing. Sales and marketing expense consists primarily of personnel
costs, including salaries, sales commission and benefits, bonuses and
stockbased compensation. These expenses also include costs related to marketing
programs, travelrelated expenses and allocated overhead. Marketing programs
consist of advertising, events, corporate communications, and brandbuilding and
developercommunity activities. We expect our sales and marketing expense to
increase in absolute dollars over time as we expand our sales force and increase
our marketing resources, expand into new markets and further develop our
self-serve and partner channels.
Research and Development. Research and development expense consists primarily of
personnel costs, including salaries, bonuses and benefits, and stockbased
compensation. It also includes amortization associated with intangible acquired
assets and allocated overhead. We expect our research and development expenses
to continue to increase in absolute dollars, as we continue to invest in our
platform and develop new products.
General and Administrative. General and administrative expense consists
primarily of personnel costs, including salaries, bonuses and benefits, and
stockbased compensation for administrative functions including finance, legal,
human resources and external legal and accounting fees, as well as allocated
overhead. We expect general and administrative expense to increase in absolute
dollars over time as we continue to invest in the growth of our business, as
well as incur the ongoing costs of compliance associated with being a
publicly-traded company.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income, interest
expense, gains and losses on investments and gains and losses from foreign
currency transactions.
Provision for Income Taxes
Provision for income taxes consists primarily of state income taxes in the
United States and income taxes in certain foreign jurisdictions in which we
conduct business.
We account for income taxes and the related accounts under the liability method.
Deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
enacted rates expected to be in effect during the year in which the basis
differences reverse.
We regularly assess the need for a valuation allowance against our deferred tax
assets. In making that assessment, we consider both positive and negative
evidence related to the likelihood of realization of the deferred tax assets to
determine, based on the weight of available evidence, whether it is more likely
than not that some or all of the deferred tax assets will not be realized. We
have maintained a valuation allowance on U.S., U.K. and Ireland net deferred tax
assets, as it is more likely than not that some or all of the deferred tax
assets will not be realized.
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We continue to monitor and interpret the impact of proposed and enacted global
tax legislation, such as the U.S. Tax Cuts and Jobs Act of 2017 ("Tax Act"). To
date, based on the net operating losses and full valuation allowances against
our two most significant tax jurisdictions, the United States and Ireland, the
impact of global enacted and proposed legislation has not had an impact on the
tax provisions of the financial statements. We continue to monitor to ensure
both our financial results and our related tax disclosures are in compliance
with any tax legislation.
Three and Nine Months Ended October 31, 2022 Summary
For the three months ended October 31, 2022, our total revenue increased to
$333.6 million as compared to $226.9 million for the three months ended October
31, 2021, primarily driven by an increase in subscription revenue from our
Direct Sales Customers. Our net loss increased to $84.8 million for the three
months ended October 31, 2022 as compared to $81.3 million for the three months
ended October 31, 2021, as improvement in gross profit was offset by higher
sales and marketing spend and research and development costs during the three
months ended October 31, 2022.
For the nine months ended October 31, 2022, our total revenue increased to
$922.7 million as compared to $607.3 million for the nine months ended October
31, 2021, primarily driven by an increase in subscription revenue from our
Direct Sales Customers. Our net loss increased to $281.0 million for the nine
months ended October 31, 2022 as compared to $222.4 million for the nine months
ended October 31, 2021, primarily driven by increased sales and marketing and
research and development costs during the nine months ended October 31, 2022.
Our operating cash flow was $(38.8) million and $(15.3) million for the nine
months ended October 31, 2022 and 2021, respectively.
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Results of Operations
The following tables set forth our results of operations for the periods
presented in U.S. dollars (unaudited, in thousands) and as a percentage of our
total revenue. Percentage of revenue figures are rounded and therefore may not
subtotal exactly.
Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Consolidated Statements of Operations Data:
Revenue:
Subscription $ 320,756 $ 217,871 $ 886,944 $ 583,822
Services 12,865 9,022 35,784 23,466
Total revenue 333,621 226,893 922,728 607,288
Cost of revenue:
Subscription(1) 77,150 57,378 213,154 153,735
Services(1) 16,502 11,086 46,990 29,959
Total cost of revenue 93,652 68,464 260,144 183,694
Gross profit 239,969 158,429 662,584 423,594
Operating expenses:
Sales and marketing(1) 177,419 120,360 509,285 327,627
Research and development(1) 106,392 82,256 310,801 219,403
General and administrative(1) 39,081 32,581 116,204 87,309
Total operating expenses 322,892 235,197 936,290 634,339
Loss from operations (82,923) (76,768) (273,706) (210,745)
Other income (expense), net 3,117 (2,276) 1,936 (9,262)
Loss before provision for income taxes (79,806) (79,044) (271,770) (220,007)
Provision for income taxes 5,035 2,249 9,230 2,411
Net loss $ (84,841) $ (81,293) $ (281,000) $ (222,418)
(1) Includes stockbased compensation expense as follows (unaudited, in
thousands):
Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Cost of revenue-subscription $ 5,016 $ 3,934 $ 14,492 $ 10,322
Cost of revenue-services 2,827 1,521 7,599 4,473
Sales and marketing 38,352 24,790 104,539 64,749
Research and development 41,458 29,205 117,583 73,227
General and administrative 11,545 9,258 35,105 24,556
Total stockbased compensation expense $ 99,198 $ 68,708 $ 279,318 $ 177,327
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Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Percentage of Revenue Data:
Revenue:
Subscription 96 % 96 % 96 % 96 %
Services 4 % 4 % 4 % 4 %
Total revenue 100 % 100 % 100 % 100 %
Cost of revenue:
Subscription 23 % 25 % 23 % 25 %
Services 5 % 5 % 5 % 5 %
Total cost of revenue 28 % 30 % 28 % 30 %
Gross profit 72 % 70 % 72 % 70 %
Operating expenses:
Sales and marketing 53 % 53 % 55 % 54 %
Research and development 32 % 37 % 34 % 36 %
General and administrative 12 % 14 % 12 % 15 %
Total operating expenses 97 % 104 % 101 % 105 %
Loss from operations (25) % (34) % (29) % (35) %
Other income (expense), net 1 % (1) % - % (2) %
Loss before provision for income taxes (24) % (35) % (29) % (37) %
Provision for income taxes 1 % 1 % 1 % - %
Net loss (25) % (36) % (30) % (37) %
Comparison of the Three Months Ended October 31, 2022 and 2021
Revenue
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Subscription $ 320,756 $ 217,871 $ 102,885 47 %
Services 12,865 9,022 3,843 43 %
Total revenue $ 333,621 $ 226,893 $ 106,728 47 %
Total revenue growth reflects increased demand for our platform and related
services. Subscription revenue increased by $102.9 million primarily due to an
increase of $95.0 million from our Direct Sales Customers, inclusive of Direct
Sales Customers who were self-serve customers of MongoDB Atlas in the prior-year
period. The increase in services revenue was driven primarily by the continued
increase in delivery of consulting services.
Cost of Revenue, Gross Profit and Gross Margin Percentage
Three Months Ended October 31,
Change
(unaudited, in thousands) 2022 2021 $ %
Subscription cost of revenue $ 77,150 $ 57,378 $ 19,772 34 %
Services cost of revenue 16,502 11,086 5,416 49 %
Total cost of revenue 93,652 68,464 25,188 37 %
Gross profit $ 239,969 $ 158,429 $ 81,540 51 %
Gross margin 72 % 70 %
Subscription 76 % 74 %
Services (28) % (23) %
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The increase in subscription cost of revenue was primarily due to a
$16.8 million increase in thirdparty cloud infrastructure costs, including
costs associated with the growth of MongoDB Atlas, although we continue to
realize efficiencies in our third-party cloud infrastructure costs as we scale
MongoDB Atlas. In addition, subscription cost of revenue was higher due to a
$2.0 million increase in personnel costs and stock-based compensation associated
with increased headcount in our support organization. The increase in services
cost of revenue was primarily due to a $3.3 million increase in personnel costs
and stock-based compensation associated with increased headcount in our services
organization. Total headcount in our support and services organizations
increased 39% from October 31, 2021 to October 31, 2022.
Our overall gross margin increased to 72%. Our subscription gross margin
benefited from efficiencies realized in managing our third-party cloud
infrastructure costs, offset by the negative impact from the increasing
percentage of revenue from MongoDB Atlas. The impact of higher services
personnel costs and stock based compensation and lower utilization rate resulted
in a lower services gross margin.
Operating Expenses
Sales and Marketing
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Sales and marketing $ 177,419 $ 120,360 $ 57,059 47 %
The increase in sales and marketing expense included $38.6 million from higher
personnel costs and stock-based compensation, driven by an increase in our sales
and marketing headcount to 2,276 as of October 31, 2022 from 1,528 as of
October 31, 2021, which includes non-quota-carrying hires in sales operations,
customer success and marketing. Sales and marketing expense also increased
$11.8 million from costs associated with our higher headcount, including higher
travel costs related to in-person events and higher commissions expense. In
addition, sales and marketing expenses increased by $2.6 million due to
increased spending on marketing programs, including the return to in-person
attendance for our marketing events.
Research and Development
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Research and development $ 106,392 $ 82,256 $ 24,136 29 %
The increase in research and development expense was primarily driven by a
$21.3 million increase in personnel costs and stock-based compensation as we
grew our research and development headcount by 26%. Research and development
expense also increased due to higher travel costs and higher office-related
expenses driven by higher headcount. Travel costs and office-related expenses
increased also due to the easing of restrictions related to the COVID-19
pandemic.
General and Administrative
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
General and administrative $ 39,081 $ 32,581 $ 6,500 20 %
The increase in general and administrative expense was due to higher costs to
support the growth of our business and to maintain compliance as a public
company. In particular, these higher costs were driven by an increase in general
and administrative personnel headcount resulting in an increase of $6.7 million
in personnel costs and stock-based compensation. These higher costs were partly
offset by a decrease in bad debt expense of $1.3 million.
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Other Income (Expense), Net
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Other income (expense), net $ 3,117 $ (2,276) $ 5,393 (237) %
Other income (expense), net for the three months ended October 31, 2022 improved
due to higher interest income from our short-term investments.
Provision for Income Taxes
Three Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Provision for income taxes $ 5,035 $ 2,249 $ 2,786 124 %
The provision for income taxes during the three months ended October 31, 2022
and 2021 was primarily due to global income and the associated foreign taxes as
we continue our global expansion.
Comparison of the Nine Months Ended October 31, 2022 and 2021
Revenue
Nine Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Subscription $ 886,944 $ 583,822 $ 303,122 52 %
Services 35,784 23,466 12,318 52 %
Total revenue $ 922,728 $ 607,288 $ 315,440 52 %
Total revenue growth reflects increased demand for our platform and related
services. Subscription revenue increased by $303.1 million primarily due to an
increase of $277.8 million from our Direct Sales Customers, inclusive of the
impact from Direct Sales Customers who were self-serve customers of MongoDB
Atlas in the prior-year period. The growth in services revenue was driven
primarily by the continued increase in delivery of consulting services.
Cost of Revenue, Gross Profit and Gross Margin Percentage
Nine Months Ended October 31,
Change
(unaudited, in thousands) 2022 2021 $ %
Subscription cost of revenue $ 213,154 $ 153,735 $ 59,419 39 %
Services cost of revenue 46,990 29,959 17,031 57 %
Total cost of revenue 260,144 183,694 76,450 42 %
Gross profit $ 662,584 $ 423,594 $ 238,990 56 %
Gross margin 72 % 70 %
Subscription 76 % 74 %
Services (31) % (28) %
The increase in subscription cost of revenue was primarily due to a
$48.1 million increase in thirdparty cloud infrastructure costs, including
costs associated with the growth of MongoDB Atlas. The increase in third-party
infrastructure costs was partly offset by continued cost efficiencies realized
as we scale MongoDB Atlas. In addition, subscription cost of revenue was higher
due to a $8.0 million increase in personnel costs and stock-based compensation
associated with increased headcount in our support organization. The increase in
services cost of revenue was primarily due to a $10.6 million increase in
personnel costs and stock-based compensation associated with increased headcount
in our services organization, and a $3.4 million increase in costs driven by an
increase in the volume of consulting and training services. Total headcount in
our support and services organizations increased 39% from October 31, 2021 to
October 31, 2022.
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Our overall gross margin improved to 72%. Our subscription gross margin
increased to 76% as efficiencies realized in managing our third-party cloud
infrastructure costs more than offset the negative margin impact from the
increasing percentage of revenue from MongoDB Atlas. The impact of higher
services personnel costs and stock-based compensation and lower utilization rate
resulted in negative services gross margin.
Operating Expenses
Sales and Marketing
Nine Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Sales and marketing $ 509,285 $ 327,627 $ 181,658 55 %
The increase in sales and marketing expense included $109.0 million from higher
personnel costs and stock-based compensation, driven by an increase in our sales
and marketing headcount to 2,276 as of October 31, 2022 from 1,528 as of
October 31, 2021, which includes non-quota-carrying hires in sales operations,
customer success and marketing. Sales and marketing expense also increased
$55.6 million from costs associated with our higher headcount, including higher
commissions expense, higher travel costs related to in-person events and higher
computer hardware and software expenses. In addition, sales and marketing
expenses increased by $12.2 million due to increased spending on marketing
programs including the return to in-person attendance for our MongoDB World
event.
Research and Development
Nine Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Research and development $ 310,801 $ 219,403 $ 91,398 42 %
The increase in research and development expense was primarily driven by a
$77.5 million increase in personnel costs and stock-based compensation as we
increased our research and development headcount by 26%. Research and
development expense also increased $13.4 million due to higher computer hardware
and software expenses, increased third-party infrastructure costs and higher
travel costs driven by higher headcount. Travel costs increased also due to the
easing of restrictions related to the COVID-19 pandemic.
General and Administrative
Nine Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
General and administrative $ 116,204 $ 87,309 $ 28,895 33 %
The increase in general and administrative expense was due to higher costs to
support the growth of our business and to maintain compliance as a public
company. In particular, these higher costs were driven by an increase in general
and administrative personnel headcount resulting in $23.2 million higher
personnel costs and stock-based compensation. In addition, general and
administrative expense increased due to higher professional services fees,
higher office-related expenses driven by higher headcount and higher travel
costs. The increase in travel costs was primarily driven by higher headcount and
the easing of restrictions related to the COVID-19 pandemic.
Other Income (Expense), Net
Nine Months Ended October 31,
Change
(unaudited, in thousands) 2022 2021 $ %
Other income (expense), net $ 1,936 $ (9,262)
$ 11,198 (121) %
Other income (expense), net, for the nine months ended October 31, 2022 improved
primarily due to gain on investments, related to our non-marketable securities,
higher interest income from our short-term investments, as well as lower
interest expense following the redemption of convertible securities.
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Provision for Income Taxes
Nine Months Ended October 31, Change
(unaudited, in thousands) 2022 2021 $ %
Provision for income taxes $ 9,230 $ 2,411 $ 6,819 283 %
The provision for income taxes during the nine months ended October 31, 2022 and
2021 was primarily due to global income and the associated foreign taxes as the
Company continues its global expansion. The provision for income taxes during
the nine months ended October 31, 2021 was offset by the release of the
valuation allowance as a result of goodwill recorded associated with an
immaterial business combination, as well as the reversal of the deferred tax
liability associated with convertible debt upon the adoption of ASU 2020-06.
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Liquidity and Capital Resources
As of October 31, 2022, our principal sources of liquidity were cash, cash
equivalents, shortterm investments and restricted cash totaling $1.8 billion.
Our cash and cash equivalents primarily consist of bank deposits and money
market funds. Our shortterm investments consist of U.S. government treasury
securities, and our restricted cash represents collateral for our available
credit on corporate credit cards. We believe our existing cash and cash
equivalents and shortterm investments will be sufficient to fund our operating
and capital needs for at least the next 12 months.
We have generated significant operating losses and negative cash flows from
operations as reflected in our accumulated deficit and historical consolidated
statements of cash flows. As of October 31, 2022, we had an accumulated deficit
of $1.5 billion. We expect to continue to incur operating losses, may continue
to experience negative cash flows from operations in the future and may require
additional capital resources to execute strategic initiatives to grow our
business. Our future capital requirements and adequacy of available funds will
depend on many factors, including our growth rate and any impact on it from
global macroeconomic conditions, including rising interest rates and inflation,
the timing and extent of spending to support development efforts, the expansion
of sales and marketing and international operation activities, the timing and
size of new subscription introductions and customer usage of our platform, the
continuing market acceptance of our subscriptions and services and the impact of
the COVID-19 pandemic on the global economy and our business, financial
condition and results of operations. As the impact of the COVID-19 pandemic and
macroeconomic conditions on the global economy and our operations continues to
evolve, we will continue to assess our liquidity needs. We may in the future
enter into arrangements to acquire or invest in complementary businesses,
services and technologies, including intellectual property rights. We may be
required to seek additional equity or debt financing. In the event that
additional financing is required from outside sources, we may not be able to
raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, operating results and financial
condition would be adversely affected.
The following table summarizes our cash flows for the periods presented
(unaudited, in thousands):
Nine Months Ended October 31,
2022 2021
Net cash used in operating activities $ (38,841) $ (15,331)
Net cash provided by (used in) investing activities 551,697 (543,578)
Net cash provided by financing activities 16,930 878,495
Operating Activities
Cash used in operating activities during the nine months ended October 31, 2022
was $38.8 million. This was primarily driven by our net loss of $281.0 million,
which was offset by noncash charges of $279.3 million for stockbased
compensation, $11.9 million for depreciation and amortization and $9.8 million
for lease-related charges. The continuing growth of our sales and our expanding
customer base led to an increase in accounts receivable of $38.3 million and
deferred commissions of $29.9 million. In addition, accrued liabilities
increased by $18.8 million reflecting our increase in expenses and timing of
payments. These were partly offset by our cash collections, which increased our
deferred revenue by $24.0 million.
Cash used in operating activities during the nine months ended October 31, 2021
was $15.3 million. This was primarily driven by our net loss of $222.4 million,
which was partially offset by noncash charges of $177.3 million for stockbased
compensation, $10.0 million for depreciation and amortization, $8.0 million for
lease-related charges, $5.0 million for accretion of discount on our short-term
investments and $3.2 million for debt issuance costs. In addition, our cash
collections increased our deferred revenue by $58.5 million, reflecting the
overall growth of our sales and our expanding customer base. Partially
offsetting these benefits to our operating cash flow was an increase in our
accounts receivable of $46.9 million, driven by our sales growth.
Investing Activities
Cash provided by investing activities during the nine months ended October 31,
2022 was $551.7 million, primarily due to proceeds from maturities of marketable
securities, net of purchases, of $561.0 million. The proceeds were partially
offset by $6.5 million of cash used for purchases of property and equipment and
$2.7 million of additional investment in non-marketable securities.
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Cash used in investing activities during the nine months ended October 31, 2021
was $543.6 million, primarily due to cash used to purchase marketable
securities, net of maturities, of $532.3 million, and $4.5 million of net cash
used for an immaterial acquisition. In addition, we used $2.3 million of net
cash to purchase non-marketable securities.
Financing Activities
Cash provided by financing activities during the nine months ended October 31,
2022 was $16.9 million, due to proceeds from the issuance of common stock under
the Employee Stock Purchase Plan and exercises of stock options, partly offset
by principal repayments of finance leases.
Cash provided by financing activities during the nine months ended October 31,
2021 was $878.5 million, primarily due to net proceeds from the equity offering,
the issuance of common stock under the Employee Stock Purchase Plan, and
exercises of stock options, partly offset by cash used to repay a portion of our
2024 convertible notes upon redemption.
Seasonality
We have in the past and expect in the future to experience seasonal fluctuations
in our revenue and operating results from time to time. We may experience
variability and reduced comparability of our quarterly revenue and operating
results with respect to the timing and nature of certain of our contracts,
particularly multi-year contracts that contain a term license. We may also
experience fluctuations as MongoDB Atlas revenue is recorded on a consumption
basis and varies with usage, including due to seasonal factors. As MongoDB Atlas
revenue continues to increase as a percentage of total revenue, these
fluctuations may have a greater impact on our results of operations. We believe
that seasonal fluctuations that we have experienced in the past may continue in
the future.
Contractual Obligations and Commitments
During the nine months ended October 31, 2022, there were no material changes
outside the ordinary course of business to our contractual obligations and
commitments from those disclosed in our 2022 Form 10-K. Refer to Note 6, Leases
and Note 7, Commitments and Contingencies, in our Notes to Unaudited Condensed
Consolidated Financial Statements included in Part I, Item 1 of this Quarterly
Report on Form 10-Q for further details.
Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation
of these financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, expenses and
related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Our actual
results could differ from these estimates.
There have been no material changes in our critical accounting estimates from
those disclosed in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the 2022 Form 10-K.
Recent Accounting Pronouncements
None.
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