MDB Q2 2019

Investment Analysis Clubs Saul’s Investing Discussions
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So MDB reported on 9/5/2018 and there were some very interesting statements in the CC. The Transcripts can be seen on Seekingalpha.com

https://seekingalpha.com/article/4204388-mongodb-inc-mdb-ceo…

A few things really stood out in this quarter. First they are accelerating Revenue. Last Quarter their Revenue was up 49% YoY and this year it was up 61.49%. They grew their customer base 72% YoY and is now at 7,400, and increase of 800 customers this quarter. In two years Atlas has gone from zero to 40 million and is growing 400% over the last year and represents 18% of revenue. They also introduced a secure Atlas the is fully hipaa compliant. They formally introduced MongoDB 4.0 with ACID guarantees. They claimed to have $1.5 million of revenue that they had not anticipated this quarter due to the timing of contracts that were signed. They ended the quarter with 438 customers with at least $100,000 in annual recurring revenue which up from 296 YoY. Their non Gaap gross margins are at 73% and their operating margins were at -38% compared to -60% YoY. They ended the quarter with $523.2 million in cash, the increase was notably due to $254 million in successful convertible notes offered in June. Their Free Cash flow was negative $18 million in the quarter.

Short-term deferred revenue was $125.5 million, up 44% YoY, while total deferred revenue of $145.8 million wa up 38% YoY. They believe longer-term trends in deferred revenue are directionally correlated to the underlying momentum of their business. As Atlas continues to become a larger portion of their business, it is important to know that it is a usage based model and does not generate meaningful deferred revenue. Atlas also is often billed monthly in arrears versus the annual and advanced billing terms they see in their advanced Enterprise customers.

The most striking part of the conference call to me was this statement from the CEO:

Yes, I mean, we do not frankly see other NoSQL vendors in deals anymore. I mean, I’m sure that they’re getting deals, but we frankly see them less and less. I can’t remember the last time, I had a sales rep complain to me about a competitive situation with another NoSQL competitor. I think it’s become clear to everyone that we have become the de facto leader in the modern database space and now customer are just contemplating what workload should they move to the cloud and what new app should they build on MongoDB. And that’s where our salespeople are spending the most time.

Also later on in the Conference Call the CEO stated:

In terms of the new vendors, this question was asked before, we typically are not seeing some of the other NoSQL players anymore. I think the market has clearly consolidated around MongoDB and we feel–we see that in terms of people kind of stadardizing on MongoDB at least–at minimum as one of the core database platforms as they plan to use in their enterprise. And so from a competitive point of view, I would say the legacy vendors are more competitive from a wallet share where they have an existing share of the wallet, but from a technology point of view, they’re becoming less and less relevant

And

I would say the antipathy towards the legacy vendors has never been higher. So we do see customers very, very motivated to move off their legacy platforms as a function of their relationships with those vendors. And so that’s one big reason.

So read the whole conference call but I would say this is one company that is really
confident. They are putting all of their money back into growing their business and they have no earnings and they have not been FCF positive yet. But for a company that has claimed they have won the NoSQL wars, why wouldn’t they keep growing their customer base.

Andy
Long MDB

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Andy, that is two quarters in a row that they are not seeing NoSQL. CTO went as far tonsaybinnqn interview that the other NoSQLs are no longer relevant, at least in regard to business Mongo goes after.

In addition Mongo has added features to its database that no one else can claim in total in an NoSQL, and Mongo continues to move faster than any of its peers.

We are not witnessing a fluke here or a transitory momentum but a true industry standard choice being made.

Tinker

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We are not witnessing a fluke here or a transitory momentum but a true industry standard choice being made.

I agree Tinker. While it’s P/S is sitting at 21.7 at this time, what do you expect from a company that has won the wars in NoSQL.

Andy

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Andy, just post about that on NPI. http://discussion.fool.com/gary-alexander-mdb-dangerously-valued…

In regard to Gary Alexander article today and how I find MDB presently undervalued.

Tinker

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I read Gary often but I have found his writing to be wrong as many times as right.

He is no where near the depth of Bert in his writings…not even close.

Still worth a read but certainly not as well researched IMO.

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Tinker,

Andy, just post about that on NPI. http://discussion.fool.com/gary-alexander-mdb-dangerously-valued……

That is a good point.

The only thing that surprised me is that Atlas is not a subscription. So I am assuming that it is an addon and that the only way you can use it is if you have a subscription to Mongo. That would make sense if that was the case, because they could get added revenue for that. Do you know if that is true?

Andy

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Atlas is not an add on that requires a subscription. It is a separate way to consume Mongo on a pay as you use basis just like on the cloud titans.

Many subscribers use Atlas as well for many reasons in addition to on premise subscription Mongo. However,
many also only use Atlas.

Atlas is mostlynrecurring revenue anyways because you never stop needing your database and your intensity of use grows as does the data in the base and the success of your software.

But mostly same product (and I expect will be nearly identical product w in a year or two) but different ways to consume Mongo. Not an add on but stand alone product where customer pays monthly on a usage basis instead of the traditional subscription basis that Mongo on premise/hybrid software sells as, as the on premise can be run in the cloud as well as desired but is consumed by annual subscription vs Atlas where in the cloud but consumer monthly by usage.

Tinker

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In regard to Gary Alexander article today and how I find MDB presently undervalued.

Hi Tinker, I’ve lost all respect for Gary Alexamnder. He starts by telling us that Mongo is at an all-time high with lots of gasps, as if that is a reason to sell. (If a stock went up 500% over a couple of years it was at an all time high when it reached up 2%, and again when it was up 3%, and again when it hit up 5%. Ruling out stocks at an all-time high would keep you out of all, ALL, big winners, by definition).

In addition he says that companies that are growing at a tiny fraction of MDB’s rate are cheaper. Well what does he expect?

Finally, Mongo has achieved Category Crusher status in its NoSQL market. Of course that gives it a higher value.

That’s the way I see it anyway. I don’t understand what he’s talking about.

Saul

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