I realize I am late to the MDB earnings party. I read the posts immediately discussing the earnings report and like most I was very much satisfied. But all the IPO talk caused MDB and Atlas to keep bouncing back into my head, as Atlas almost seems like an IPO in and of itself. So I decided to revisit MDB and parse out the specific growth pattern for Atlas by breaking the last 6 earning reports apart. I used 605 numbers because it was easier to get them going back 6 quarters and there seemed to be only a minor impact switching between 605/606 on Atlas revenue. I only went back 6 quarters because Atlas starts to get very small any further back. Breaking down MDB revenue looks like this:
Q1 Q2 Q3 Q4 Revenue FY18 41.5 45 FY19 48.2 57.5 65 83.1 Atlas FY18 3.3 5 FY19 6.7 10.4 14.3 28.3 Non-Atlas Sub FY18 38.2 40 FY19 37.9 42.5 50.7 49.9 Services FY18 3.6 3.2 FY19 3.7 4.6 4.9 4.9
The biggest thing that jumps out to me is that Atlas has finally moved beyond “growing from a tiny base” insignificance and has become the primary means of revenue growth. Non-Atlas Sub growth was 25% yoy and essentially flat-lined between Q3 and Q4. Atlas grew by 98% Q3 to Q4 and 467% yoy. More significantly, Atlas is finally big enough to have an outsize impact on overall revenue numbers. Breaking apart the revenue numbers clearly shows that Atlas was the driving force behind revenue growth accelerating from 56.6% yoy in Q3 to 84.6% in Q4 as Non-Atlas growth actually decelerated. Now that Atlas has established a larger revenue share, the impact of Atlas growth rate on overall revenue growth rate is only going to increase.
Taking Saul’s advice of ignoring MDB’s earning forecasts I simply ran the numbers for FY20 assuming they maintain the same growth rates Q to Q to see what would happen. For simplicity, I also assumed Non-Atlas Sub and Services revenue remain flat. Using those assumptions, projected revenue looks like this:
Q1 Q2 Q3 Q4 Revenue FY18 41.5 45 FY19 48.2 57.5 65 83.1 FY20 90.4 111.3 133.4 212.6 Atlas FY18 3.3 5 FY19 6.7 10.4 14.3 28.3 FY20 37.9 58.8 80.9 160.1 Non-Atlas Sub FY18 38.2 40 FY19 37.9 42.5 50.7 49.9 FY20 47.5 47.5 47.5 47.5 Services FY18 3.6 3.2 FY19 3.7 4.6 4.9 4.9 FY20 5 5 5 5
That produces a FY20 annual revenue of 547.7m and a further accelerating growth rate of 115% yoy. Is that achievable or absurd? I think it is more likely than the current laughable company/analyst guidance of 370m. Even if Atlas growth slows dramatically (let’s say the sequential Q to Q growth cuts in half), revenue will clear 410m with an Atlas growth rate of 167% yoy. So bracketing a dramatic slowdown (on the low end) to maintain current growth rate (on the high end) would be between 410-547m. If TAM is truly close to 80b then there is plenty of room to run here. Others would know better than I do. The nearly 100% Q3 to Q4 growth tells me that Atlas is not approaching a plateau and maintaining growth rate is certainly in the realm of the possible.
Anyways, enough for the late night thought experiment. I will sleep soundly long MDB.