MongoDB Is Officially Disrupting Databases

The world’s data is changing. Social networks, e-commerce sites, and the Internet of Things are now providing text strings, web logs, and other forms of unstructured information that is collected from a variety of inputs.

Appropriately, the world’s need for databases is also changing. MongoDB (NASDAQ:MDB) is helping companies capture these new data sets, with general-purpose databases providing a more flexible and open-source way for developers to harness information to create business-specific applications.

MongoDB has been one of the market’s best recent performers. Its stock increased in value by 182% in 2018 and is already up 64% year to date in 2019.

Will the good times continue to roll? Can the company possibly maintain this incredible momentum? To answer these questions, let’s take a closer look at its recently reported fourth-quarter results.

A picture of several employees gathered around a laptop

Image source: Getty Images.

MongoDB results: The raw numbers

Metric Fiscal Q4 2019 Fiscal Q4 2018 Year-Over-Year Change
Revenue $85.5 million $50.0 million 71%
Operating income ($23.8 million) ($20.9 million) N/A
Adjusted earnings per share ($0.17) ($0.27) N/A

Data source: MongoDB. Mongo adopted the new ASC 606 accounting standard in 2019, which may affect annual comparisons.

What happened with MongoDB this quarter?

MongoDB’s expanding relationship with existing customers and mass-market appeal with new ones is causing its top line to surge:

Revenue grew 71% to $85.5 million, driven by a 73% increase in subscription revenue to $80.6 million. The growth rate of the company’s top line actually accelerated over the previous quarter, when revenue grew 57%. Gross margin was 70%, down 500 basis points from 75% in the fourth quarter of last year. Atlas — MongoDB’s database-as-a-service offering — grew revenue by more than 400% over last year. Atlas now accounts for 32% of total revenue, compared to only 10% a year ago and 21% a quarter ago. Overall, MongoDB now has 13,400 customers, 130% more than it had a year ago. Atlas has 11,400 customers, though 4,200 of them came directly from the November acquisition of mLab. Notably, 557 customers (4% of the total) contribute at least $100,000 of annual recurring revenue. This is up from 354 six-figure customers in the year-ago period. The company’s net annual recurring revenue expansion rate, which compares subscription revenue today to revenue from the same customers one year ago, was above 120% for the 16th consecutive quarter.

What management had to say

While the quarterly results were very good, President and CEO Dev Ittycheria focused for much of the conference call on his company’s prospects:

Our goal is to maximize the massive market opportunity in front of us. We believe our wide appeal, the success of our customers and our financial performance continue to clearly highlight that MongoDB’s document database offers the best way to work with data.

Documents correspond directly to objects and mainstream object oriented programming languages, so developers can store and organize data according to the natural relationships among entities in the real world. This enables developers to focus on building applications the way it makes the most sense, not on working around the limitations of their database.

Our document-based architecture addresses a broad range of popular data models, enabling a wide variety of use cases. As a result, MongoDB is experiencing accelerating adoption with developers.

The total number of MongoDB downloads from our website alone is now more than 60 million with more than 20 million occurred in the last 12 months, up from more than 12 million in fiscal 2018.

Looking forward

Investors will immediately notice that Atlas has been on fire. Atlas is quintupling its revenue contribution every year, which is impressive in and of itself. But it is also organically adding 1,000 new customers every quarter. This serves as fairly compelling evidence that its cloud-based, open-source solution is winning customers over from Oracle’s (NYSE:ORCL) proprietary and on-premise relational databases. In other words, the value offered to customers by Atlas is now great enough for them to abandon their current provider. In investor parlance, this is known as “overcoming switching costs,” and it can often provide a very powerful tailwind.

The 60 million MongoDB downloads are equally impressive. A download doesn’t necessarily equate to a paying customer, but it does suggest a potential interest. There are only an estimated 25 million professional developers across the world. So this huge number means that non-professionals (i.e., small businesses) are curious enough about Mongo’s products to begin to experiment. If even just 2% of the number of people who downloaded were to convert, the company would have more than 1 million customers. In other words, Mongo’s 13,000 current customers could be just a drop in a much larger bucket.

MongoDB once again lost money on both an operating and net basis, but that doesn’t appear to be concerning. Its $460 million of cash and short-term investments should be able to fund business operations at their current level for several years, while also supporting its investment in its growth opportunity.

Management expects $363 million to $371 million in revenue and a net loss of $0.98 to $1.06 per share for fiscal 2020. If achieved, that would be 37% top-line growth and an improvement from a net loss of $1.90 per share during fiscal 2019.

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