MongoDB carries a bit of nostalgia for our team as it was one of the first stocks we covered after launching the premium site in July of 2019. At the time, there were concerns DocumentDB would rival Atlas yet Amazon had declared Atlas the segment winner at the open-source conference OSCON that month.
The company reported revenue of $285 million compared to estimates of $267 million for a $18 million beat. This represents growth of 57% and is the highest growth rate since Q3 2019. Particularly, it proves MongoDB can accelerate post-Covid which is rare among its peers.
The company had a sizable beat on adjusted EPS of $0.20 compared to estimates of ($0.10) EPS, which was a ($0.30) beat. The company’s adjusted operating income was $17.5 million compared to a loss of $2.8 million in the year ago quarter.
On a GAAP basis, the company reported EPS of ($1.14). Notably, GAAP losses increased this quarter to ($75.9) million compared to a GAAP loss of ($61.4) million in the year ago quarter. This is due to stock-based compensation expenses of $91 million with shares increasing from 61 million to 67 million over the past 12 months.
Gross margin expanded from 72% in the year ago period to 75% for gross profit of $214.3 million. The company stated this was due to increased efficiencies in Atlas. The company has $1.8 billion in cash and cash equivalents of which $456 million is cash. The company’s cash flow this quarter was $8.4 million, which is down from $16.8 million sequentially. Operating cash flow was $11.6 million compared to $22.3 million last quarter which management explained is partly because Q4 has more days than Q1 for consumption.
MongoDB is estimating a $30 to $35 million headwind. With that said, MongoDB reiterated guidance for the full year at $1.18 billion which would imply the company had expected to beat by $30 to $35 million. Management is also forecasting a $4 to $5 million headwind for next quarter yet was still able to raise guidance from $277 million expected next quarter to $279 million-$282 million provided as new guidance. The headwind of 1% sequential growth this quarter came from slower-than-expected customer growth in self-serve and mid-market channels in Europe yet could spread to impact all geographies.
The earnings guide for next quarter is for adjusted EPS of ($0.31) to ($0.28).
As we had covered three years ago, the MongoDB story centers around Atlas. This was the fourth quarter of over 80% growth and it now comprises 60% of revenue compared to 51% of revenue in the year-ago quarter.
There were ample questions about why MongoDB was able to weather the weakness in consumer-facing businesses better than Snowflake. The management feels they are more insulated because their consumption is tied to the value and usage of the applications and databases are not something that can be shut on, shut off or moderated by choice.
Here is the exact quote:
So the people are not using their application, something has gone wrong. So the more they use the application, the more value they’re seeing. So there’s a direct correlation between the value they get from the apps running on MongoDB and the value we get from those customers. Other software companies that you mentioned, I think are being forced to consider alternatives to be because there’s a trend where there’s a slight mismatch between price to value because as they suck in more data, it’s not completely clear how much incremental value that data is providing. So we don’t see that problem.
Probably the biggest contrast between Snowflake’s call and MongoDB’s call was that Snowflake noted a slowdown in a few of their biggest customers while MongoDB noted only a slowdown in their self-serve and mid-market. MongoDB also emphasized they are well diversified with six times more customers than Snowflake “tens and tens of thousands of customers” and due to representing more industries.
Conclusion:
We had stated the following:
“As stated above, MongoDB’s cash flow margin is what can keep the stock strong given stock based compensation is weighing on GAAP operating margin. We want a meet/beat on revenue, strong Atlas growth (bonus for acceleration) and we must continue to have a healthy, positive cash flow margin.
Analyst consensus has MongoDB reaching profitability on an adjusted basis by calendar year 2023.”
MongoDB proved they can become profitable on an adjusted basis in calendar year 2022 so that’s a plus. The company maintained its cash flow positive status. There were beats and raises alongside conservative guidance, which was really the ticket this quarter. It was easily the better report over Snowflake primarily because Snowflake has begun to concern analysts that the exposure to consumer could cause the company to become discretionary (more information is needed beyond one quarter). Meanwhile, MongoDB clearly illustrated this quarter its document databases are not discretionary.
Additional Reading: