MongoDB earnings: Atlas growth at 66%

MongoDB had yet another stellar quarter, according to earnings just reported. This is the most popular NoSQL database in the world. I wrote some time ago on this board that the revenue numbers from AWS and Azure would bode well for our SaaS companies that leverage those clouds, and the numbers below prove that. Here are some highlights:

  • Total revenue was $171.0M in the latest Q, an increase of 38% year-over-year
  • Revenues from Atlas, their SaaS managed database service, grew 66% YoY, and represents almost half their revenue now.
  • Non-GAAP gross profit was 72%. Beautiful.
  • Full year revenue of $591M was up 40% YoY.

Announced the general availability of MongoDB Realm Sync, a fully managed service that synchronizes data between the Realm mobile database and MongoDB Atlas. This new solution addresses the unique technical challenges of mobile development, saving developer’s time by reducing the amount of code they need to write and the complexity of their application architecture.

Launched a global partnership with Tencent Cloud, allowing customers to consume MongoDB-as-a-Service across Tencent’s global cloud infrastructure and securely build, deploy and scale powerful applications. With this partnership, the two largest cloud providers in China now provide authorized MongoDB managed service offerings, demonstrating the popularity of MongoDB in one of the largest markets in the world.

Expanded the Google Cloud partnership with deeper technical integrations and joint customer programs to make MongoDB Atlas easier to consume through the Google Cloud Marketplace. Since the inception of the partnership, we’ve seen a dramatic increase in new business as customers have selected MongoDB Atlas as a superior alternative to relational database solutions

-Ron
Long MDB since Feb. 2018, thanks to Saul and this board.

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* Total revenue was $171.0M in the latest Q, an increase of 38% year-over-year
* Revenues from Atlas, their SaaS managed database service, grew 66% YoY, and represents almost half their revenue now.

Just for context and comparison sake, this is where they were at the previous report ending October 2020 issued in December:-

Revenue growth (YoY) +37.76%
Atlas revenue growth (YoY) +61% and representing 47% of total revenues

So revenue growth has accelerated from 37.76% to 38.4% and Atlas growth has accelerated from 61% to 66% and is at 49%. Atlas should cross the 50% mark and assuming its superior growth rate remains should increase the impact on MDB total revenue growth profile.

non GAAP GM did fall from 72% to 70%.

MDB is a holding that I have been trimming of late but these results are enough to keep my position and not sell up and reinvest elsewhere for now - as tempting as that has been during this correction.

Ant

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Yes, most everything about this earnings announcement looked really good to me as well.

Guidance

Their guidance was for +25% growth (which we knew was sandbagged) and they came in at +38%. They’ve been pretty steady at 38-39% each of the past three quarters, since the pandemic began.

Looking ahead, they project +30% at the high end of both Q1, and FY next year guidance, which I suspect is also very conservative. Especially if they benefit like I think they might as things open up in the second half of 2021, I won’t be surprised if MongoDB’s revenue accelerates above the +40% growth they had this past year.

Customer Growth

Here is some customer growth information from the conference call:

Customer count grew from 17,000 last year, to 24,800 at the end of the year.

In the fourth quarter alone, customer count increased by 2,200 sequentially!

Customers $100k+ per year, increased from 751 last year to 975.

And their biggest customers that do over $1 million+ per year each, increased from 62 last year to 98, +58%

Listening to the call, I continue to believe that MDB still has a lot of high growth years ahead of them. MongoDB has continued to be one of my largest holdings, and I don’t see that changing anytime soon

-mekong

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Hi everybody,

Looking at the most recent figures and guidance for next year, especially with the note about Atlas now being ~50% of revenues and the fastest growing part, I wondered what that meant for total revenue acceleration this coming year as Atlas moves into the majority position. Here’s where my mind went. Please, I ask if you are so inclined, keep my math honest and call me out on any mistakes I might have made, as I don’t want to mislead myself or anyone else on this board.

  • Growth split: Atlas -49%, Rest -51%, I’m rounding to 50-50 for simplicities sake

  • Of 171m rev this qtr., split is then 85.5m for Atlas/rest

  • Given overall growth was 38% and Atlas was 66%, the rest is growing at ~10%

  • Their subscription growth grew to 164m from 144m last quarter, or 13.9% sequentially

  • Overall rev. growth was up 13.2% QoQ from 151m to 171m

  • Interestingly though, next quarter’s guide is only 167-170m, so slightly negative QoQ. Maybe a flag we should be cautious of?

  • 171m extrapolated over 4q is 684m, while next year’s guidance is 745-765m, indicating 61-81m (~15-20m/qtr) in increases from the most recent qtr. over the coming 4q. Recall this quarter’s increase was 20m over last Q, yet the next Qtr guide is flat-slightly negative…

If Atlas continues to grow at 66% the next 4 quarters, that looks like 97 - 110 - 125 - 142, for a total of 474.1m next FY. If the rest of the business remains steady at 10%, that would be 87.6 - 89.8 - 92.1 - 94.4, for a total of 363.9m, giving a full year revenue of ~838m, accelerating from this year’s 38% growth rate to 41.8% overall in FY22, and beating the top end of their guide by 73m, a beat of slightly less than 10% overall.

That 73m on top of the 81m from my last bullet point would be 154m, or an avg. beat of ~38.5m each of the next 4 quarters, almost twice this quarter’s beat. That seems unlikely to me, and makes me think that Atlas is likely to decelerate from 66% this year. That said, in order for the numbers to come in “just” at the high end of their guidance (765m), Atlas would have to fall to 35% for the full year and the rest from 10% to 5.3% growth, all of which seems highly unlikely to me.

So what to make of all of this? Well, given that Atlas is finally at the threshold of being the primary revenue generator for the company, I do expect to see overall revenue growth accelerate going forward. If my calculations above are accurate, and reality isn’t too far off, then the acceleration will be gradual. I think the key question for me is will Atlas continue to grow in the 60’s this year and going forward, or will it decelerate quickly. I haven’t dug deep enough to see Atlas’s current history of deceleration, but if anyone has it handy and wishes to share, I for one would be grateful. I don’t think Atlas’ growth is going to cut in half this year, and I do think that it will be a good thing for price appreciation if their overall growth gets back above 40% from 38% today. Based on nothing but blind confidence, I think that MDB and Atlas continues to have a long runway and should not decelerate much from this point and could even accelerate if their sales operations has their act together. If Atlas accelerate from 66% occurs, that would be VERY good for the stock price.

I’ve held a small ~1.5% position for some time now, and am considering bumping this up to the 3-5% range while I wait to see how the next few quarters play out. If things do decelerate towards the low-mid 30’s overall, I will almost certainly redeploy funds elsewhere. Appreciate others’ opinions and analysis.

Respectfully yours,
Frank

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* Interestingly though, next quarter’s guide is only 167-170m, so slightly negative QoQ. Maybe a flag we should be cautious of?

* 171m extrapolated over 4q is 684m

There is some seasonality as I believe Q4 is a stronger quarter than Q1 (although in some past years, they were growing so fast that they still had sequential growth from Q4 to Q1.)

They talked about this a little on today’s earnings call, specifically highlighting that the Q1 guide is lower than Q4’s revenue. Although realistically I’m sure they will beat the guide and still have sequential growth next quarter. it just won’t be sequentially as big as the other quarters of the year.

So also be careful annualizing/extrapolating Q4 as tho all quarters are created equal. The seasonality isn’t as extreme as a retailer, or even an advertising company like TTD, but there is some seasonality based on customers typical purchasing/spend cycles and due to the fact that a portion of MDB’s revenue gets recognized at signing, even if much of it gets spread over the term.

-mekong

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If Atlas continues to grow at 66% the next 4 quarters, that looks like 97 - 110 - 125 - 142, for a total of 474.1m next FY

Frank, that doesn’t look correct. Here are the approximate Atlas revenue for the last several quarters: (I just used total revenue times the percentage they said Atlas was of the total.)

Fiscal 2019
Q4 85.5 * .32 = 27.4

Fiscal 2020
Q1 89.4 * .35 = 31.3
Q2 99.4 * .37 = 36.8
Q3 109.4 * .40 = 43.8
Q4 123.5 * .41 = 50.6 (85%)

Fiscal 2021
Q1 130.3 * .42 = 54.7 (75%)
Q2 138.3 * .44 = 60.9 (66%)
Q3 150.8 * .47 = 70.9 (61%)
Q4 171.0 * .49 = 83.8 (66%)

So even if they continue at 66% that would be:

Fiscal 2022
Q1 90.8
Q2 101.1
Q3 117.7
Q4 139.1

Total: 448.7m (not 474.1m)

Also – until yesterday’s report, Atlas growth had been slowing each quarter. Assuming it will stay at 66% probably isn’t prudent.

Bear

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There is some seasonality as I believe Q4 is a stronger quarter than Q1 (although in some past years, they were growing so fast that they still had sequential growth from Q4 to Q1.)


	Rev	Apr	Jul	Oct	Jan
605 -->	FY2018	34.7	38.4	42.9	50.1
606 -->	FY2019	50.1	59.6	70.2	85.5
	FY2020	89.3	99.4	109.4	123.5
	FY2021	130.3	138.3	150.8	171.0

Q1 has always come in above Q4 sequentially, albeit by a small percentage. However, the guide is for $168.5 million at the midpoint, and if they beat by about 10% in Q1 (like they did this quarter), they’ll come in at almost $185 million. This would be a sequential increase of about 8%, which is higher than any sequential increase they’ve had in the past.

The number of Atlas customers has shown accelerating growth YoY and almost so sequentially.


QTR	Atlas	YoY	Sequential
Jul-18	5,300	178.9%	20.5%
Oct-18	6,200	138.5%	17.0%
Jan-19	11,400	235.3%	83.9%
Apr-19	12,300	179.5%	7.9%
Jul-19	13,200	149.1%	7.3%
Oct-19	14,200	129.0%	7.6%
Jan-20	15,400	35.1%	8.5%
Apr-20	16,800	36.6%	9.1%
Jul-20	18,800	42.4%	11.9%
Oct-20	21,100	48.6%	12.2%
Jan-21	23,300	51.3%	10.4%

The most relevant takeaway from this is that, as Frank suggests, we should see revenues slowly accelerate for the next few quarters unless Atlas performs unexpectedly poorly. It’s nice too see them executing so well.

DJ

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Bear, thank you so much for correcting me on that. Starting at my rounding up to 85.5 vs. the 83.8 you noted resulted in a difference of over 25m!! That’s not peanuts by any stretch. Lesson learned in using napkin math/rounding as I did there late last night. I have enormous respect and appreciation for all that you bring to the table and thank you again. I’ve learned so much and yet have so far still to go!

I will revisit my figures and your’s on my lunch break and share if anything new pops out at me. I think the general takeaway, for me anyway, and as others have posted already, is that it looks like there will be slow acceleration in total revenue this coming year, and there appears to be a pretty strong floor to support that (unless Atlas growth really falls off a cliff), meaning worst case I think they’ll remain flat ~38% YoY as opposed to declining. I like that lower downside, and reaccelerating total growth, while it may be slow, is better than falling growth for many others. To be clear, I consider CRWD, DDOG, & many others here to be a totally different ballgame due to the huge gap in growth rate, even while declining, but when I look at MDB versus, say, OKTA as a steady mover, I will seriously consider keeping a bit in both, and more equally than I have in the past.

With gratitude,
Frank

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FWIW, I have the same numbers as Bear.


Revenue							%YoY					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017	$21.51	$23.61	$26.31	$29.93	$101.36		2017					55.3%
2018	$32.39	$35.60	$41.49	$50.05	$166.03		2018	50.6%	50.8%	57.7%	50.5%	52.4%
2019	$50.14	$59.61	$71.78	$85.48	$267.02		2019	48.8%	61.5%	56.6%	70.8%	60.8%
2020	$89.39	$99.37	$109.44	$123.52	$421.72		2020	78.3%	66.7%	52.5%	44.5%	57.9%
2021	$130.30	$138.28	$150.80	$171.00	$590.40		2021	45.8%	39.2%	37.8%	38.4%	40.0%


Atlas Revenues (estimate off release %)							%YoY					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017							2017					
2018			$3.84	$5.48			2018					
2019	$7.11	$10.73	$15.36	$27.40	$60.60		2019			300.0%	400.0%	
2020	$31.29	$36.77	$43.78	$50.50	$162.33		2020	340.0%	242.6%	185.0%	84.3%	167.9%
2021	$54.75	$61.03	$70.88	$83.79	$270.45		2021	75.0%	66.0%	61.9%	65.9%	66.6%

While it was a nice bump in sequential growth, the FY22 guides for 30% revenue growth and -10% operating margin are pretty uninspiring even if sandbagged. And profitability and cash flows have basically been stuck the last two years (and arguably gone backwards the last few quarters):


non-GAAP Operating Income							% Revenues					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017							2017					
2018	-$15.35	-$21.25	-$18.35	-$14.52	-$62.76		2018	-47.4%	-59.7%	-44.2%	-29.0%	-37.8%
2019	-$18.88	-$17.87	-$7.78	-$9.69	-$54.22		2019	-37.7%	-30.0%	-10.8%	-11.3%	-20.3%
2020	-$12.64	-$14.76	-$14.26	-$12.05	-$53.71		2020	-14.1%	-14.9%	-13.0%	-9.8%	-12.7%
2021	-$7.40	-$10.17	-$16.00	-$16.00	-$49.60		2020	-5.7%	-7.4%	-10.6%	-9.4%	-8.4%
												
non-GAAP Net Income							% Revenues					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017			-$15.02	-$17.23	-$65.72		2017			-57.1%	-57.5%	-64.8%
2018	-$15.34	-$21.16	-$18.52	-$13.65	-$61.96		2018	-47.3%	-59.4%	-44.6%	-27.3%	-37.3%
2019	-$18.76	-$17.46	-$6.90	-$9.07	-$52.19		2019	-37.4%	-29.3%	-9.6%	-10.6%	-19.5%
2020	-$12.08	-$14.68	-$14.59	-$14.52	-$55.88		2020	-13.5%	-14.8%	-13.3%	-11.8%	-13.2%
2021	-$7.31	-$12.72	-$18.20	-$19.90	-$58.12		2020	-5.6%	-9.2%	-12.1%	-11.6%	-9.8%
												
non-GAAP Free Cash Flow							% Revenues					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017							2017	0.0%	0.0%	0.0%	0.0%	0.0%
2018	-$12.43	-$16.06	-$10.39	-$8.13	-$47.02		2018	-38.4%	-45.1%	-25.0%	-16.2%	-28.3%
2019	-$8.42	-$18.05	-$9.75	-$12.63	-$48.84		2019	-16.8%	-30.3%	-13.6%	-14.8%	-18.3%
2020	$2.83	-$13.80	-$13.10	-$10.95	-$35.02		2020	3.2%	-13.9%	-12.0%	-8.9%	-8.3%
2021	-$8.52	-$14.97	-$14.91	-$20.70	-$59.10		2021	-6.5%	-10.8%	-9.9%	-12.1%	-10.0%

This lack of bottom line improvement as growth continues to shrink is what’s most concerning to me. Most of the companies discussed here show better operating leverage as they scale. At this point Atlas just doesn’t seem to be growing fast enough to make up the difference. That puts a lot of pressure on the recent customer growth kicking in soon in my opinion. Might happen, might not.

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And profitability and cash flows have basically been stuck the last two years (and arguably gone backwards the last few quarters)…

…This lack of bottom line improvement as growth continues to shrink is what’s most concerning to me. Most of the companies discussed here show better operating leverage as they scale.

Just my own opinion/perspective, but MDB is not one of my companies that I want to see them focusing on profitability, or cash flow for that matter, in the next couple of years. They probably had more headwinds than tailwinds during the 2020 pandemic, yet still grew at +40%, and I see them having several more years of growth between 35-45%, as they become more and more of a standard for many company’s db needs.

Yes, a lot of the companies discussed here had a lot of operating leverage over the past 12 months, at least partially because the pandemic supercharged their revenue and didn’t require a huge amount of incremental spending to generate it. Some of these are clearly great companies that will probably have continued leverage as they grow going forward, but I do think some of them are going to struggle when some of those tailwinds fade away and they have to really ramp up their spending to support their desire for outsized growth, which may not be a knock on them, or a bad thing, (it’s what I would hope MDB would do), it’ll just be more of a normal environment.

On the earnings call they specifically said that none of the companies they are working with are looking to expand their SQL or Oracle footprint (embellishment maybe, sure but I would bet it’s largely true), and even in many of MongoDB’s biggest customers, they said that MDB represents a very small (but growing) portion of those big customers’ db spend.

I want them to keep spending as much as they can to best grow today and over the next few years. Taking their foot off the pedal now to worry about the bottom line will make it a whole lot more likely someone else will step in and unseat them. Of course, I don’t want them to overspend and run out of money, I’m just saying they don’t need to prove themselves as a cash flow machine right now. There will be plenty of time for that when they are 5-10 times larger than they are today, as I believe they will be in the not too distant future.

At the same time, I don’t blame anyone for wanting to focus more on faster hyper growth companies that are already more profitable, there’s lots of great companies there in that category that get coverage on this board.

MDB is one of my biggest positions because it’s one of the tech companies I own that I feel I understand the best, one where I view the downside, or even opportunity cost risk as low, and where the potential for outsized gains continue to be high, even after the stock has risen from $30 to $300 over the past 3.5 years. I believe there is a very long way to go for MongoDB, and they are positioned pretty fantastically right now.

-mekong

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I do not own MDB for similar reasons as outlined by stocknovice, but it is also important to keep in mind the impact of mLab when considering Atlas growth rates as they transition from FY20 to FY21 to FY22.

Revenue from the mLab acquisition counts as Atlas revenue in MDB’s numbers. mLab first impacted financials in Q4’FY19 contributing $6M of revenue that quarter. As outlined at time of acquisition and in subsequent earnings calls, the intention of mLab was to move those customers to Atlas and then have it dwindle away. This greatly benefited FY’20 but then hurts subsequent quarters until it is completely decommissioned. From Q1’21 earnings call: “In addition to the dynamics in existing self-service customer that I referenced, mLab, as expected, represented the growth headwind as we’re in the final stages of transitioning those customers before we deprecate the mLab platform.” MongoDB stopped providing mLab numbers in Q4’20 but given prior statements mLab has gone from ~$6M/Qtr in Q4’19 to ~$3M/Qtr in Q4’20 and one would assume close to $0/Qtr as of Q4’21. The numbers don’t sound huge on the surface but this basically equates to Atlas having an anchor around its neck regarding its compared since Q4’20 and it is slowly lifting. In FY’21 I would estimate they did $5M in total as things wound down compared to ~$17M in FY’20 (numbers provided quarterly by MDB verbally on earnings calls). This compare gets better and better each quarter and in FY’22 it will only be a ~$5M impact to full year Y/Y compare vs the ~$12M impact to FY’21 Y/Y compare.

All that to say… I would not be surprised if Atlas is able to maintain a 66% growth rate in FY’22 with possibly even an “acceleration” in growth rate in 1H of the year vs what they have done the last few quarters given the lifting anchor. After this upcoming year is when I would expect the slight growth deceleration to kick in due to scale.

Even so, I expect the overall topline for the year will still top out around ~40% and they will have the same profitability / FCF concerns impacting the ability to carry a valuation (P/S) closer to some of the other SaaS stocks discussed on this board.

Erik

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