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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, 2021 (the "2021 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 ongoing COVID-19 pandemic, 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 are redefining 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 3,223 as of October 31, 2021, from 2,334 as of October 31, 2020. 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, 2021 and October 31, 2020. 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, 2021, MongoDB Atlas revenue represented 58% and 55% of our total revenue, respectively, and during the three and nine 22
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MONGODB, INC. months ended October 31, 2020, MongoDB Atlas revenue represented 47% and 44% of our total revenue, 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 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, and includes our proprietary commercial database server, enterprise management capabilities, our graphical user interface, analytics integrations, technical support and a commercial license to our platform. MongoDB Enterprise Advanced revenue represented 34% and 36% of our subscription revenue for the three and nine months ended October 31, 2021, respectively, and 43% and 46% of our subscription revenue for the three and nine months ended October 31, 2020, 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 210 million times since February 2009 and over 80 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, 2021 and October 31, 2020. 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 $74 billion in 2021 growing to approximately $121 billion in 2025, 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 heavily to grow our business to take advantage of our market opportunity rather than optimizing for profitability or cash flow in the near term. Impact of the Ongoing COVID-19 Pandemic The ongoing COVID-19 pandemic has continued to impact the United States ("U.S.") and the world. The full extent of the impact of the ongoing 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 causes COVID-19; the public health measures taken by authorities and other entities to contain and treat COVID-19; the actions taken to effect a widespread, global roll-out of the available vaccines and the efficacy and durability of such vaccines; 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. During 2021, we began to re-open our offices in the U.S. and certain other locations globally for employees to voluntarily return, subject to certain restrictions and government regulations, and we have taken recommended measures to protect the health and safety of employees who return to the office, including with respect to occupancy limitations, masking requirements and other safety measures. We have informed our employees that they may continue to elect to work remotely until conditions improve, even if their office reopens. Business travel on a voluntary basis has started to resume, although our travel costs continue to be lower than pre-pandemic levels. We have also started to hold some in-person marketing events. While certain travel bans and other restrictions that were 23
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MONGODB, INC. implemented at the beginning of the pandemic were relaxed earlier in the year, recently, due to the identification of the Omicron variant, among other developments, some of these restrictions have been re-imposed, and new restrictions may be implemented. We are actively monitoring the situation related to the COVID-19 pandemic, and we may adjust our policies as may be required or recommended by federal, foreign, state or local authorities. We will continue to evaluate the nature and extent of the impact of COVID-19 on our business. For further discussion of the potential impacts of the ongoing COVID-19 pandemic 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 ongoing COVID-19 pandemic may also further 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, heavily in our sales and marketing efforts and developer community outreach, which are critical to driving customer acquisition. As of October 31, 2021, we had over 31,000 customers across a wide range of industries and in over 100 countries, compared to over 22,600 customers as of October 31, 2020. All affiliated entities are counted as a single customer. Our customer count as of October 31, 2021 includes customers acquired from ObjectLabs Corporation ("mLab") and Tightdb, Inc. ("Realm"), which acquisitions closed on November 1, 2018 and May 7, 2019, respectively. Our definition of "customer" excludes (1) users of our free offerings, (2) mLab users who spend $20 or less per month with us and (3) self-serve users acquired from Realm. The excluded mLab and Realm users collectively represent an immaterial portion of the revenue associated with users acquired from those acquisitions. As of October 31, 2021, we had over 3,900 customers that were sold through our direct sales force and channel partners, as compared to over 2,800 such customers as of October 31, 2020. These customers, which we refer to as our Direct Sales Customers, accounted for 85% and 84% of our subscription revenue for the three and nine months ended October 31, 2021, respectively, and 82% and 81% of our subscription revenue for the three and nine months ended October 31, 2020, respectively. The percentage of our subscription revenue from Direct Sales Customers increased during both the three and nine months ended October 31, 2021, 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. After launching in June 2016, we had over 29,500 MongoDB Atlas customers as of October 31, 2021. The growth in MongoDB Atlas customers included customers from mLab and Realm, as described above, as well as 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 adoption of this DBaaS offering, in 2017, we introduced 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 now 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 24
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MONGODB, INC. customers of MongoDB Atlas and Microsoft and makes it easier for established Azure customers to purchase and use MongoDB Atlas. In addition, MongoDB is part of Microsoft's strategic partner program. 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 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 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 subscriptions to our platform. 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 1,201 and 898 as of October 31, 2021 and 2020, 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 remained over 120% during the three months ended October 31, 2021, 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 up front. 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. 25
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MONGODB, INC. We expect our revenue may vary from period to period based on, among other things, the timing and size of new subscriptions, 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 personnel costs, including salaries, bonuses and benefits, and stockbased compensation, for employees associated with our subscription arrangements principally related to technical support and allocated shared costs, as well as depreciation and amortization. Our cost of subscription revenue for our hosted asaservice solutions also includes third-party cloud infrastructure expenses. 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 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 and incur the costs of compliance associated with being a publicly traded company. Other Expense, Net Other income (expense), net consists primarily of interest income, interest expense and gains and losses from foreign currency transactions. 26
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MONGODB, INC. 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 continue to monitor and interpret the impact of proposed and enacted global tax legislation, such as the Coronavirus Aid, Relief, and Economic Security Act, and the impact of such legislation on effective tax rate and tax provision thereunder. To date, based on the full valuation allowance 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, 2021 Summary For the three months ended October 31, 2021, our total revenue increased to $226.9 million as compared to $150.8 million for the three months ended October 31, 2020, primarily driven by an increase in subscription revenue from our Direct Sales Customers. Our net loss increased to $81.3 million for the three months ended October 31, 2021 as compared to $72.7 million for the three months ended October 31, 2020, driven primarily by higher sales and marketing spend and research and development costs during the three months ended October 31, 2021. For the nine months ended October 31, 2021, our total revenue increased to $607.3 million as compared to $419.4 million for the nine months ended October 31, 2020, primarily driven by an increase in subscription revenue from our Direct Sales Customers. Our net loss increased to $222.4 million for the nine months ended October 31, 2021 as compared to $191.1 million for the nine months ended October 31, 2020, primarily driven by increased sales and marketing and research and development costs during the nine months ended October 31, 2021. Our operating cash flow was $(15.3) million and $(24.0) million for the nine months ended October 31, 2021 and 2020, respectively. Our free cash flow was $(23.5) million and $(38.4) million for the nine months ended October 31, 2021 and 2020, respectively. See the section titled "Liquidity and Capital Resources-Non-GAAP Free Cash Flow" below. 27
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MONGODB, INC. Results of Operations The following tables set forth our results of operations for the periods presented in 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, 2021 2020 2021 2020 Consolidated Statements of Operations Data: Revenue: Subscription $ 217,871 $ 144,069 $ 583,822 $ 401,403 Services 9,022 6,702 23,466 17,978 Total revenue 226,893 150,771 607,288 419,381 Cost of revenue: Subscription(1) 57,378 38,642 153,735 103,240 Services(1) 11,086 7,468 29,959 22,851 Total cost of revenue 68,464 46,110 183,694 126,091 Gross profit 158,429 104,661 423,594 293,290 Operating expenses: Sales and marketing(1) 120,360 83,214 327,627 227,417 Research and development(1) 82,256 54,363 219,403 149,250 General and administrative(1) 32,581 25,175 87,309 66,534 Total operating expenses 235,197 162,752 634,339 443,201 Loss from operations (76,768) (58,091) (210,745) (149,911) Other expense, net (2,276) (13,634) (9,262) (39,090) Loss before provision for income taxes (79,044) (71,725) (220,007) (189,001) Provision for income taxes 2,249 926 2,411 2,142 Net loss $ (81,293) $ (72,651) $ (222,418) $ (191,143) (1) Includes stockbased compensation expense as follows (unaudited, in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2021 2020 2021 2020 Cost of revenue-subscription $ 3,934 $ 2,446 $ 10,322 $ 6,508 Cost of revenue-services 1,521 1,513 4,473 4,142 Sales and marketing 24,790 14,696 64,749 38,754 Research and development 29,205 15,442 73,227 41,415 General and administrative 9,258 5,855 24,556 17,225
Total stockbased compensation expense $ 68,708 $ 39,952 $ 177,327 $ 108,044
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MONGODB, INC. Three Months Ended October 31, Nine Months Ended October 31, 2021 2020 2021 2020 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 25 % 26 % 25 % 25 % Services 5 % 5 % 5 % 5 % Total cost of revenue 30 % 31 % 30 % 30 % Gross profit 70 % 69 % 70 % 70 % Operating expenses: Sales and marketing 53 % 55 % 54 % 54 % Research and development 37 % 36 % 36 % 36 % General and administrative 14 % 17 % 15 % 16 % Total operating expenses 104 % 108 % 105 % 106 % Loss from operations (34) % (39) % (35) % (36) % Other expense, net (1) % (9) % (2) % (9) % Loss before provision for income taxes (35) % (48) % (37) % (45) % Provision for income taxes 1 % - % - % 1 % Net loss (36) % (48) % (37) % (46) % Comparison of the Three Months Ended October 31, 2021 and 2020 Revenue Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Subscription $ 217,871 $ 144,069 $ 73,802 51 % Services 9,022 6,702 2,320 35 % Total revenue $ 226,893 $ 150,771 $ 76,122 50 % Total revenue growth reflects increased demand for our platform and related services. Subscription revenue increased by $73.8 million primarily due to an increase of $66.1 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 increased delivery of consulting services. 29
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MONGODB, INC.
Cost of Revenue, Gross Profit and Gross Margin Percentage
Three Months Ended October 31,
Change
(unaudited, in thousands) 2021 2020 $ % Subscription cost of revenue $ 57,378 $ 38,642 $ 18,736 48 % Services cost of revenue 11,086 7,468 3,618 48 % Total cost of revenue 68,464 46,110 22,354 48 % Gross profit $ 158,429 $ 104,661 $ 53,768 51 % Gross margin 70 % 69 % Subscription 74 % 73 % Services (23) % (11) % The increase in subscription cost of revenue was primarily due to a $15.1 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 $2.7 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 higher personnel costs from increased headcount in our services organization and higher expense associated with our China Stock Appreciation Rights Plan. Total headcount in our support and services organizations increased 31% from October 31, 2020 to October 31, 2021. Our overall gross margin increased slightly to 70%. 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 higher expense associated with our China Stock Appreciation Rights Plan resulted in negative services gross margin. Operating Expenses Sales and Marketing Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Sales and marketing $ 120,360 $ 83,214 $ 37,146 45 % The increase in sales and marketing expense included $25.7 million from higher personnel costs and stock-based compensation, driven by an increase in our sales and marketing headcount to 1,528 as of October 31, 2021 from 1,062 as of October 31, 2020, which includes non-quota-carrying hires in sales operations, customer success and marketing. Sales and marketing expense also increased $9.4 million from costs associated with our higher headcount, including higher commissions expense. Research and Development Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Research and development $ 82,256 $ 54,363
$ 27,893 51 %
The increase in research and development expense was primarily driven by a $24.2 million increase in personnel costs and stock-based compensation as we grew our research and development headcount by 36%. General and Administrative Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % General and administrative $ 32,581 $ 25,175 $ 7,406 29 % 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 30
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MONGODB, INC. administrative personnel headcount resulting in an increase of $5.5 million in personnel costs and stock-based compensation and equipment. Other Expense, Net Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Other expense, net $ (2,276) $ (13,634) $ 11,358 (83) % Other expense, net for the three months ended October 31, 2021 decreased primarily due to the adoption of the new accounting standard for convertible senior notes, which eliminated the amortization of the debt discount previously associated with our 0.75% convertible senior notes due 2024 and 0.25% convertible senior notes due 2026. Provision for Income Taxes Three Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Provision for income taxes $ 2,249 $ 926 $ 1,323 143 % The provision for income taxes during the three months ended October 31, 2021 and 2020 was primarily due to an increase in foreign taxes as we continued our global expansion. The provision for income taxes during the three months ended October 31, 2020 was partially offset by a tax benefit related to prior year period gains recorded in other comprehensive income that resulted from unrealized gains on investments. Comparison of the Nine Months Ended October 31, 2021 and 2020 Revenue Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Subscription $ 583,822 $ 401,403 $ 182,419 45 % Services 23,466 17,978 5,488 31 % Total revenue $ 607,288 $ 419,381 $ 187,907 45 % Total revenue growth reflects increased demand for our platform and related services. Subscription revenue increased by $182.4 million primarily due to an increase of $167.6 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 growth in services revenue was driven primarily by the increased delivery of consulting services. Cost of Revenue, Gross Profit and Gross Margin Percentage Nine Months Ended October 31,
Change
(unaudited, in thousands) 2021 2020 $ % Subscription cost of revenue $ 153,735 $ 103,240 $ 50,495 49 % Services cost of revenue 29,959 22,851 7,108 31 % Total cost of revenue 183,694 126,091 57,603 46 % Gross profit $ 423,594 $ 293,290 $ 130,304 44 % Gross margin 70 % 70 % Subscription 74 % 74 % Services (28) % (27) % The increase in subscription cost of revenue was primarily due to a $40.0 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 31
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MONGODB, INC. was higher due to an $8.1 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 $5.4 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 31% from October 31, 2020 to October 31, 2021. Our overall gross margin remained flat. Our subscription gross margin is negatively impacted by the increasing percentage of revenue from MongoDB Atlas, offset by efficiencies realized in managing our third-party cloud infrastructure costs. The impact of higher services personnel costs and stock-based compensation resulted in negative services gross margin. Operating Expenses Sales and Marketing Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Sales and marketing $ 327,627 $ 227,417 $ 100,210 44 % The increase in sales and marketing expense included $73.7 million from higher personnel costs and stock-based compensation, driven by an increase in our sales and marketing headcount to 1,528 as of October 31, 2021 from 1,062 as of October 31, 2020, which includes non-quota-carrying hires in sales operations, customer success and marketing. Sales and marketing expense also increased $18.4 million from costs associated with our higher headcount, including higher commissions expense and higher software costs. In addition, sales and marketing expenses increased by $3.6 million due to higher spend on marketing programs. Research and Development Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Research and development $ 219,403 $ 149,250 $ 70,153 47 % The increase in research and development expense was primarily driven by a $64.6 million increase in personnel costs and stock-based compensation as we increased our research and development headcount by 36%. General and Administrative Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % General and administrative $ 87,309 $ 66,534 $ 20,775 31 % 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 $19.7 million higher personnel costs and stock-based compensation. Other Expense, Net Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Other expense, net $ (9,262) $ (39,090) $ 29,828 (76) % Other expense, net for the nine months ended October 31, 2021 decreased primarily due to the adoption of the new accounting standard for convertible senior notes, which eliminated the amortization of the debt discount previously associated with our 0.75% convertible senior notes due 2024 and 0.25% convertible senior notes due 2026. 32
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Table of Contents MONGODB, INC. Provision for Income Taxes Nine Months Ended October 31, Change (unaudited, in thousands) 2021 2020 $ % Provision for income taxes $ 2,411 $ 2,142 $ 269 13 % The provision for income taxes during the nine months ended October 31, 2021 was primarily the result of an increase in foreign taxes partially 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. The provision for income taxes during the nine months ended October 31, 2020 was primarily due to an increase in foreign taxes as we continued our global expansion, partially offset by a tax benefit related to the prior year period gains recorded in other comprehensive income that resulted from unrealized gains on investments. 33
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MONGODB, INC. Liquidity and Capital Resources As of October 31, 2021, we had 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. On October 1, 2021, we issued a notice of redemption (the "Redemption Notice") for all of the aggregate principal amount outstanding of our 2024 Notes. Pursuant to the Redemption Notice, on December 3, 2021, we redeemed the outstanding principal of the 2024 Notes that were not converted prior to such date at a redemption price in cash equal to 100% of the principal amount of the 2024 Notes, plus accrued and unpaid interest. Approximately $1.9 million aggregate principal amount outstanding as of October 31, 2021, were converted to 27,377 shares of our Class A common stock with the remaining balance settled in cash. The extinguishment of the 2024 Notes on December 3, 2021 is immaterial to our financial statements. On June 29, 2021, we entered into an underwriting agreement with Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, as representatives of the several underwriters named therein, pursuant to which we agreed to issue and sell 2,500,000 shares of our Class A common stock, par value $0.001 per share, at an offering price of $365.00 per share. We received net proceeds of $889.2 million, after deducting underwriting discounts and commissions of $22.7 million and offering expenses of $0.6 million. Offering expenses included legal, accounting and other fees. 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, 2021, we had an accumulated deficit of $1.1 billion. We expect to continue to incur operating losses and 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, the timing and extent of spending to support development efforts, the expansion of sales and marketing and international operation activities, the timing of new subscription introductions, the continuing market acceptance of our subscriptions and services and the impact of the ongoing COVID-19 pandemic on the global economy and our business, financial condition and results of operations. As the impact of the ongoing COVID-19 pandemic 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, 2021 2020 Net cash used in operating activities $ (15,331) $ (24,028) Net cash used in investing activities (543,578)
(284,016)
Net cash provided by financing activities 878,495
16,002
Operating Activities 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. Cash used in operating activities during the nine months ended October 31, 2020 was $24.0 million primarily driven by our net loss of $191.1 million, which was partially offset by noncash charges of $108.0 million for stockbased compensation, $36.6 million for the amortization of our debt discount and issuance costs, $9.5 million for depreciation and 34
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MONGODB, INC. amortization and $7.7 million for lease-related non-cash charges. Accrued and other liabilities increased by $24.3 million primarily from commissions, bonuses and related payroll taxes accrued as of October 31, 2020. Our overall sales growth increased our deferred commissions by $17.2 million, our accounts receivable by $4.2 million and our deferred revenue by $5.8 million. Investing Activities 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. Cash used in investing activities during the nine months ended October 31, 2020 of $284.0 million resulted from the purchases of marketable securities and property and equipment, partially offset by maturities of marketable securities. In addition, we used $0.5 million of net cash to purchase non-marketable securities. Financing Activities 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 Class A 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. Cash provided by financing activities during the nine months ended October 31, 2020 was $16.0 million, primarily due to proceeds from the exercises of stock options and from the issuance of Class A common stock under the Employee Stock Purchase Plan, partially offset by issuance costs related to our January 2020 offering of 0.25% convertible senior notes due 2026 that had been accrued as of January 31, 2020, as well as principal repayments of finance leases. NonGAAP Free Cash Flow To supplement our interim unaudited condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we provide investors with the amount of free cash flow, which is a nonGAAP financial measure. Free cash flow represents net cash used in operating activities less capital expenditures, principal repayments of finance lease liabilities and capitalized software development costs, if any. During each of the nine months ended October 31, 2021 and 2020, we did not capitalize any software development costs. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. The exclusion of capital expenditures, principal repayments of finance lease liabilities and amounts capitalized for software development facilitates comparisons of our liquidity on a periodtoperiod basis and excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business in the same manner as our management and Board of Directors. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAPbased financial performance measures, such as net cash used in operating activities, and our other GAAP financial results. The following table presents a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated (unaudited, in thousands): Nine Months Ended October
31,
2021
2020
Net cash used in operating activities $ (15,331) $
(24,028)
Capital expenditures (4,516)
(10,942)
Principal repayments of finance leases (3,649) (3,450) Capitalized software - - Free cash flow $ (23,496) $ (38,420) 35
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Seasonality
We have in the past and expect in the future to experience seasonal fluctuations in our revenue and results from time to time. In addition, as a result of the adoption of Accounting Standards Update No. 201409, Revenue from Contracts with Customers (Topic 606), we may experience greater variability and reduced comparability of our quarterly revenue and results with respect to the timing and nature of certain of our contracts, particularly multi-year contracts that contain a term license. Contractual Obligations and Commitments During the nine months ended October 31, 2021, there were no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in our 2021 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 Policies and 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 policies from those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2021 Form 10-K. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements, including our adoption of the new standard for our convertible senior notes under Accounting Standards Update 2020-06. 36
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