Mongo results

https://seekingalpha.com/pr/17185354-mongodb-inc-announces-f…

Looks good to me - it will probably fall 10%, but that’s the market.

Over 6,600 Customers at April 30, 2018, up 83% Year-over-Year
MongoDB Atlas Revenue 14% of Total Q1 Revenue, up over 400% Year-over-Year

Revenue: Total revenue was $48.2 million, an increase of 49% year-over-year. Subscription revenue was $44.6 million, an increase of 53% year-over-year, and services revenue was $3.7 million, an increase of 14% year-over-year.
Gross Profit: Gross profit was $34.5 million, representing a 71.5% gross margin, consistent with the year-ago period. Non-GAAP gross profit was $35.0 million, representing a 72.6% non-GAAP gross margin.

18 Likes

My company released an internal email with a reward for finding certain candidates to fill needed slots. One of the skillsets we are looling for was MongoDB.

10 Likes

My company released an internal email with a reward for finding certain candidates to fill needed slots. One of the skillsets we are looling for was MongoDB.

Welcome to the party!

I am reading the MongoDB earnings report now. Off and on, as I have a glass of wine and watching a movie in the home theatre as well. But he age of multi-task because we really cannot help ourselves.

I am not going into any of the numbers, but what you come away with is the fact that MongoDB is “the” new standard database for modern work loads, period.

ACID, that is in version 4.0, is not necessarily going to draw suddenly those happy with SQL databases, but will draw more and more workloads, because now MongoDB is future proof. Start off with something, if it works, you know you can now move transactions onto it, when that becomes the thing to do. Eventually, after the product matures more, and the market accepts this with confidence, then you might very well see those using SQL databases, but having difficulty scaling with them, or future proofing them, specifically transfer to Mongo precise because they can replace the transactional component plus future proof them.

There is no other NoSQL database that can do this. I am going back to the movie now, and will finish up reading later, but the qualitative aspects of the earnings report are quite confidence inspiring (yes, that is what corporate management is very good at, but we have plenty of proxy data to support this supposition of becoming the standard, and this is precisely what this company is trying to embed, worldwide and make happen. It has been a long while since a new standard bearer in an important enabling software platform, as this is another PaaS, the fastest growing part of cloud services, has come about. The last still exist, Microsoft and Oracle. Microsoft has given up the standard thing, although it still basically is on the desktop, and ORacle has somewhat conceded to open source, having bought the #2 database in the world, that is open source, but neither offers what MongoDB brings.

Wonder how much that is worth to a potential acquirer, when you consider the premium that MULE went for. And we often talk about how “I don’t want this company being bought out,” and I usually think that is just naive, take the huge premium and move on. But here, that applies. The new standard being created in unstructured modern databases. And practically every application in the world, and every data dump, is based upon a database as the underlying technology.

It is kind of like oil. We say data is the oil of the modern economy. Perhaps. But if so, the database is the gasoline and plastic and other derivatives, that is manufactured into a more usable product, that in the end is a material part of the cost of all products.

I will let it sink in before I gush some more. It is easy to want something and to fool oneself. But with MongoDB, in regard to becoming the standard, I do not think it is gushing but objective analysis as to the current trends, and as to the structure of the database marketplace, where it is not a winner take all market, but is a winner take most market. And we are seeing this I think.

At least this underpins everything management is doing with MongoDB, so clearly they are trying to capture exactly this extremely lucrative status.

Tinker

18 Likes

@Tinker - I totally agree that Mongo is the new standard general purpose database - it will continue to grow and take over the world over the next 20 years.

With the open source model, we have to make sure they are monetizing the growth, but their emphasis and growth in both customers and revenue, their growth in both subscriptions and Atlas, shows their eye is firmly on the ball and they are operating really well.

Customers at April 30, 2018, up 83% Year-over-Year

  • Adding customers is key to future growth - customers will add support subscriptions and/or Atlas workloads. 83% increase in customers is amazing

MongoDB saw a 47% increase in six-figure relationships with customers
47% increase in big deals…

meaningful growth including in markets where the company has historically had little to no presence
The story of Mongo taking over the world is continuing

Atlas comprised 14% of total revenue for the first quarter of fiscal year 2019, representing over 400% year-over-year growth… Atlas added approximately 1,000 customers in the quarter
400% growth from a running start is fantastic - of course it will slow down to a reasonable rate. 1000 new Atlas customers in this quarter is amazing

Total revenue was $48.2 million, an increase of 49% year-over-year. Subscription revenue was $44.6 million, an increase of 53% year-over-year, and services revenue was $3.7 million, an increase of 14% year-over-year.
Subscription revenue up 53% yoy - and remember they are now emphasizing Atlas not subscription growth, so this subscription growth is despite a change in focus of the sales team. (By the way, I’m assuming here that subscriptions refers to support subscriptions, and Atlas is backed out, since this is broken out in the numbers separately)

This is a company to buy and keep for 20 years. I would say going in and out of Mongo is risky - you never know when a large investor will decide to get a stake and push up the price - and this will continue as far as the eye can see.

Like I said on my first post about Mongo on these boards, this is like when Oracle first started dominating Sql, and only the IT guys knew it for sure. Step by step the investing community got it, and in the meantime, if you were in first, you could reap all the rewards.

21 Likes

Brokers price targets adjusted on MDB :

Stifel to $53
Needham to $57
Moness & Crespi to $60
Canaccord to $54
Barclays to $57
and Nomura stays at $40.

Rob

1 Like

Hello,

This is a company to buy and keep for 20 years. I would say going in and out of Mongo is risky - you never know when a large investor will decide to get a stake and push up the price - and this will continue as far as the eye can see.

A few days ago I believed that thought. After listening to the call yesterday and reviewing the transcript this morning, I have sold 95% and will keep 5% to make sure that I track progress closely. My reasoning is that the stock has doubled since the IPO just 7 months ago and the company has made very little progress toward profitability. I understand that land and expand demands a strong effort to land when demand is there. However there is little discipline exerted in cash generation to keep up with the growth in expenses. I want to see a demonstration of operating leverage improvement. Selling expense increased faster than sales! The CFO implied that cash flow would be even more negative in the next quarter. I am not so sure that this management team has a strong enough desire to achieve profitability, at least in terms of cash generated from operations. I have gone out and will get back in when I see evidence of a profit culture. I may have to pay a much higher price then, but if we are each correct that this is a company to keep for 20 years, I won’t lose sleep over a higher cost basis.

Best regards,

Mike

21 Likes

Mike,

In this circumstance I see it just the opposite. I think it would be utter incompetence to do anything except become the standard generalized database in the world. It also ignores how nascent Atlas is (two years old at best, and with negative gross margins - as it is so new), and ignores just how large an opportunity this is, thus how large this business will need to get to scale before the business does scale. Much larger than most of the companies we follow. Except for the likes of say an Oracle (say 1/4 the present opportunity that Oracle built out as Mongo currently stands). That requires a much larger revenue base to scale the business.

They only burned through $8 million in cash last quarter, and this despite a business that has far longer to go until it reaches scale than almost any successful business we follow.

You buy Mongo not because of the cash it can print now, but because, like with what a Netflix became when it switched to all streaming and the market killed the company because of the cash cow of DVDs would be gone, what it can be built into.

I respectfully disagree on your assessment in regard to profitability being a very high priority here at this point in time. But respect your decision to stick within your own investment parameters as there are plenty of other places to invest. ANET of course is just the opposite at this point in time when it comes to finances, as an example.

Tinker

12 Likes

I will provide one recent example that may be analogous. MULE. Salesforce paid 16x revenue for an utterly unprofitable company. This is because MULE was becoming the standard means of connecting disparate applications together.

Should MULE have pulled back, looked at the bottom line, and let a competitor equal them in size and stature so they could make some more money in this land and grab stage?

No, that would have destroyed a ton of shareholder value.

Is Mongo building shareholder value buy attempting to become the standard database? Or would Mongo build more shareholder value by better being disciplined financially while not pursuing as aggressively the opportunity in front of it to become “the” standard unstructured general purpose database in the world?

I believe Mongo, like MULE before it, is doing exactly what it needs to to maximize shareholder value.

Tinker

14 Likes

This is a company to buy and keep for 20 years.

Then it would be unique among Saul Stocks, which are typically held my most here over only a much shorter period of time.

BTW, it’s interesting to read how the founders of the company shifted their plans and products over the years. Originally founded as 10gen, the company was going into the PaaS market (using Open Source components), but didn’t find a suitable database product. So, they started developing one on its own and called it MongoDB. Like Shopify writing their own e-commerce software to sell their surfboards and then changing the company to sell the software instead, 10gen decided that MongoDB was the product to sell and so they changed their focus and name.

I believe that while MongoDB is still Open Source (and in heavy use by many people who pay nothing), the company makes its money selling support and what they MongoDB Enterprise, which adds security, encryption, and in-memory storage leveraging. It also includes a license for inclusion/resell of the compiled DB so that customers don’t have to deal with Open Source licensing/credits.

5 Likes

Hello Tinker,

They only burned through $8 million in cash last quarter, and this despite a business that has far longer to go until it reaches scale than almost any successful business we follow.

They burned a little over $8 million in a quarter where seasonally they receive more cash. Wait until next quarter when they have less cash coming in and a major marketing event to pay for along with capex for their expanded office.

That said, I don’t like having a different strategy than someone with your record. Thanks very much for all the contributions you make in Fooldom!

I did not mean to imply that I would wait for profitability to get back in. I am waiting to see progress toward that and am measuring that progress by cash from operations. I still hold ANET and would not compare them with MDB. I did compare AYX to MDB and comparable forward enterprise value/revenues and comparable growth, but AYX is much more disciplined on “investment” and cash flow positive and nearing profitability. Admittedly, with less upside to scale to. I like PSTG and NTNX even more than AYX, but I allow myself 10 to make up a portfolio so have more balls in the air.

Best regards,

Mike

7 Likes

Netflix became when it switched to all streaming and the market killed the company because of the cash cow of DVDs would be gone

Quite an inaccurate spin there, Tinker.

What actually happened is that the CEO, Reed Hastings, decided to split the company into two: one for DVDs and one for streaming. He wasn’t thinking about his customers, though, as no customer would want to have two separate places to go to find what to watch. I myself would search for what to watch, and then see if I could stream or had to request a DVD/BluRay. Who would want to do that search twice on two different web sites? Investors like me got scared that perhaps NetFlix didn’t really know their customers after all and punished the stock.

The hit to the stock made Hastings change course, and NetFlix today remains one company. It turned out to be a great buying opportunity, which unfortunately has given TMF confidence in other high flying companies like CMG that got hit.

4 Likes

@creelon
My reasoning is that the stock has doubled since the IPO just 7 months ago and the company has made very little progress toward profitability. I understand that land and expand demands a strong effort to land when demand is there. However there is little discipline exerted in cash generation to keep up with the growth in expenses. I want to see a demonstration of operating leverage improvement. Selling expense increased faster than sales! The CFO implied that cash flow would be even more negative in the next quarter. I am not so sure that this management team has a strong enough desire to achieve profitability, at least in terms of cash generated from operations. I have gone out and will get back in when I see evidence of a profit culture. I may have to pay a much higher price then, but if we are each correct that this is a company to keep for 20 years, I won’t lose sleep over a higher cost basis.

Hey Mike, you raise important concerns. I want companies I invest in to be profitable, and give me a clear path to getting back my money and making a profit.

I think it would be good to get some perspective on what Mongo is doing, and why sales and marketing expense is going to increase faster than revenue for the next few quarters. I’m going to copy in part of a post I wrote on an analysis in Seeking Alpha.

https://seekingalpha.com/article/4180054-mongodb-unexciting-…

In the article, the author says:

it’s obvious that this hyper-growth cost MongoDB plenty in operating expenses. Most notably, sales and marketing expenses grew 53% y/y to $33.9 million in the quarter, consuming 70.3% of revenues (up 200bps from 68.3% in 1Q18). So yes, it’s true that MongoDB’s growth is exceeding expectations, but the company is simply investing more in sales to produce that higher growth rate.

It’s true they are spending a ton of money on sales and marketing, but looking under the kimono to understand the phase the company is in will help to understand why sales and marketing expenses should be growing very quickly for the next while, before they start leveling off.

Until about a couple of years ago, there was no significant enterprise sales force at Mongo and their sales were by word-of-mouth. Most of their spend was R&D to win the No-Sql database wars, and marketing targeted at developers to get the database in use. They held developer events, training, conferences, created tools etc. They succeeded stupendously - they won developers, they won platforms, they proved they could scale, perform, and be flexible.

Now they are switching from a word-of-mouth sales process to a real enterprise sales force that will maximize the revenue from their investments in developing their product and their mindspace and brand with technologists.

Expect lots of expenses as they spin up an enterprise sales force. This will not only be salespeople. They will spend much more on senior consultants, architects and developers who can provide pre-sales and after-the-sale support to enterprise customers. I have received a number of emails from their recruiters, so I know they are hiring like crazy. I don’t know their internal plan, but I’d expect lots of investment in enterprise sales and support until the group is solid and operating well - after that they should be making money (not tons, but positive anyways) as they charge for enterprise support - the big picture is they greatly increase the speed at which they grow service subscription and Atlas revenue from large enterprises.

Mongo is like Ford when it was owned by Henry Ford - it owns a product that is transforming the world. It needs to create an entire company infrastructure to support enterprise sales - like Ford built a network of dealerships to sell its cars. It costs a lot of money to create this enterprise group, but the group will be profitable once it is built up, and it will vastly transform the speed of sales into enterprise companies.

Their sales and marketing spend today is not like buying Superbowl ads and sock-puppet TV commercials. They are building an infrastructure that will enable them to sell to enterprises for decades.

16 Likes

I find target prices amusing. As the market presence and usage continues to grow, the targets are periodically adjusted upwards. Sometimes, there’s the “valuation” scare, and then targets get adjusted downwards.

On the other hand they brokers could just admit they have no idea what the market will do and how the stock will perform. They could just provide an evaluation of the technology similar to what Tinker just did. Just recommend buy until such time there’s a real, justifiable reason to not buy.

And while I’m at it. What are we supposed to make of a “hold” recommendation? What does that mean? Why hold a stock that’s not worth buying? I look at everyone of my 13 companies and think if I had more investment funds I don’t have a single position I wouldn’t buy more of. The tough decision is more about level of confidence and percentage of my portfolio. I don’t have any positions that in my estimation are “hold” much less “sell” positions.

IMO, a target price is pretty much the same thing as price anchoring.

3 Likes

Mike,
Precisely the same logic could be applied to Amazon at almost any time during the last 20 years or so.

1 Like

Until about a couple of years ago, there was no significant enterprise sales force at Mongo and their sales were by word-of-mouth. Most of their spend was R&D to win the No-Sql database wars, and marketing targeted at developers to get the database in use.

This was emphasized on the conference call. The CEO said that he had at least 20 C-level meetings regarding MongoDB. Something he has never really had much of before, and in fact no product really does. Most of these meetings begin with the new enterprise sales force, instead of developers going up the line.

It is clearly the sign of momentum. Whether it sustains itself or peters out is always the question. But given that new apps are not abating, and that MongoDB has presently one the mindshare to be the standard unstructured modern general purpose database, and firms that are digitally transforming themselves (as has become the descriptive term) are forward looking, it is hard to see this momentum not naturally sustaining itself.

Somewhat like the ARM v. MIPS days. There were MIPS supporters, and MIPS ran some niche areas better. But the market spoke loudly as most general purpose and then everything else almost was going to ARM, despite MIPs fans staying with them. Is MIPS still even in business?

Tinker

5 Likes

I think Mike brings up a good point that shouldn’t be brushed aside. Revenue growth can fix a whole lot of problems, but is there a certain limit where you say enough? MDB net margins are -60% with guidance that they intend to grow losses going forward. If you are buying here, you are buying on faith that they will continue to execute.

If they were losing $50M per quarter would you still have faith? At some point you would have to fear dilution, no?

4 Likes

Hello,

I think I should make it clear that I agree with Tinker and SteppenWulf on their investment thesis in MongoDB. If I were 20 years younger my strategy would be similar to theirs. I am more familiar with Tinker’s portfolio and as he has moved the number of companies from 2-4 he must be very, very selective and confident in his picks. I have 10 companies in my portfolio and am having no trouble finding that many outstanding opportunities. I have one highly speculative investment that I have been following for many years and have built a position way higher than normal. I expect that in the next 6 months I will sell some of that. I don’t expect MDB to have run far during that time as they are not yet matching the growth in their share price with revenue progress.

I love the company and was not trying to influence others to sell, I just feel that I have some time to get back in, if circumstances warrant. MongoDB 4.0 will come out officially on June 27. This will not have time to move the stock for the second Q of their fiscal year on the basis of reported revenues and I think the company will not be far ahead of its current price after the next earnings call. I also expect to get reports from Tinker and SteppenWulf on the efficacy of MongoDB 4.0 prior to the market in general having much data to work on. These guys are WELL out in front here IMO.

Best regards,

Mike

8 Likes

We are talking about a nascent company here with what appears to be tremendous growth. I don’t own MDB yet, but plan to. I was one hoping for these type of results followed by a large drop in the stock price. No such luck. I’ll be getting in anyway.

I’ll need to check to see what their cash position looks like, but am assuming they are fine. If not and their solution is truly as amazing as it sounds, they will use convertible note financing with a capped call like every other SaaS company is using to finance themselves even though the ones I’ve seen don’t really need it.

IDC claims today’s database market is $62B. Let’s say MDB has distruptive pricing and a product that everyone wants and cut that TAM by an order of magnitude. If the become the true leader, there is tons of room for growth even assuming a TAM of 1/10th what IDC claims today. I think I’m being conservative enough here.

A.J.

2 Likes