Listening to the earnings calls last quarter, 6 of the 10 SaaS companies I follow explained that the digital transformation had been accelerated by 3-5 years or more in the past 2-3 months. I expect this trend to continue in the coming earnings calls for those fortunate companies benefiting from the global pandemic that has forced the entire world to hunker down, work from home, and exercise social distancing.
MongoDB is often the first company I reference when I am explaining the Digital Transformation to friends or family who don’t understand what is going on. Full disclosure: I have owned MDB stock over 2 years now and enjoyed over 300% returns on my investment. I still have a 7% position.
The Bigger story I tell: Three years ago, the world digitized more information in one year than in all prior years combined. Two years ago, they repeated that feat, INCLUDING the prior year. Last year they did it again, including the prior 2 years: Pictures, books, video, audio and all data is being digitized at a rate not even fathomed just a few years ago… Exponential vs linear growth is happening now, as we build upon the digital revolution that started 80-100 years ago and is only now reaching the hockey stick trajectory . The mass of information now available causes a virtual “firehose” of information and data that we are impossibly trying to drink from…and it is those SaaS companies that allow us to efficiently 1) harness, 2) store, 3) analyze, 4) access 5) secure and protect and 6) use that digitized data which are not just surviving now, but thriving and accelerating in this era of massive confusion, chaos and inevitable change.
MDB is and has been fulfilling several of these mandates not just for the past three years since they went public in October 2017, but for the past 13 years since they started the company in 2007 and have added new functionality, drivers, security and other feathers along the way. Straight from the company website: “First and foremost in MongoDB Cloud is a foundation for working with data. MongoDB Atlas, Search, and Data Lake serve different workloads through a common API, while Realm Database extends the data foundation to the edge.”
Many on this board will no doubt point first to MDB’s subscription revenue growth rate as a reason they may no longer be in this name: a paltry (dripping with sarcasm) 45.8% last q/q (48.6% Subscription revenue growth). That kind of growth still puts this company in the top .1% of all public companies (and probably the top .01%) with a market cap of roughly $12B now and a massive TAM remaining to capture. I will grant, as can be seen in their last 9 quarters of total revenue growth rate below, that their revenue growth % (not actual dollars) has slowly decellerated over the past 5 quarters, but 45.8% total revenue and 48.6% subscription revenue growth last quarter is a slight increase over the prior sequential quarter and I anticipate that the growth to start to reaccelerate again in this environment (and also would argue that at least some of the deceleration was due to growing pains, difficult prior years quarterly comparisons, and additions of new features and offerings). By the way, their Atlas DB growth was 76% last quarter~~ Regardless, this kind of continued revenue growth as they have scaled and built their company is incredible and nothing to simply disregard as a flash in the pan:
44.3% Q1 2019
78.3% Q1 2020
45.8% Q1 2021 (Most recent quarterly revenue growth ended April 30, 2020)
48.6%. Q1 2021 (Most recent quarterly revenue growth ended April 30, 2020)
I will maintain my bet on MDB and “let it ride” that with the acceleration being caused by Covid-19, MDB will continue its fantastic growth and is even likely to see a re-accelleration in the coming quarters as they continue to thrive and benefit from this transformation that has become a requirement, not a need based transformation. I believe they are one of the critical “picks & shovels” of this digital revolution and one that every company, government, and individual now needs and requires as part of their growing business infrastructure. Their Atlas DB offering is one of those critical components and is available on all three major cloud platforms provided by Google, Microsoft, and AWS! (I also will reiterate that Atlas showed re-accellerated 76% growth last quarter!)
What is NOSQL? It does NOT mean “no” SQL (or “not” Structured Query Language)…it means “Not Only” SQL. It offers “not only” Oracles traditional and rather antiquated SQL, but everything else now required in this digital transformation to the cloud and on the edge…a database which gives you a way to manage the data which is in a non-relational form, i.e. which is not structured in a tabular manner and does not possess tabular relationships. NoSQL is increasingly gaining popularity as it is being employed in big data and real-time applications. Their data structures are completely different from those of relational databases like Oracle’s back in the day (where I used to work a long time ago). NoSQL is an alternative to conventional relational databases in which data is put in tables and the data structure is carefully designed before the database is created. It is mainly helpful for working with huge sets of distributed data…the kind we are encountering now!! NoSQL databases are scalable, high performance and flexible in nature. This is, for lack of a better metaphor, allowing MDB to eat Oracle’s lunch right now!
The following interview last month with the CEO, Dev Ittycheria, is also worth a read to get a flavor of their management and trajectory:
I admit I’m just a finance guy and prefer to focus on the numbers and am hopelessly naive with most of the technology, but MDB fits very neatly into my larger thesis of where we are headed globally. I took one of the first SaaS companies public in the Valley in 2000, so I focus on investing in SaaS companies. While some of my information is anecdotal and based on simplistic conversations with companies, individuals and IT professionals in Silicon Valley where I live, work, and invest, those that I have spoken with tell me that MDB (a NY based company) is the “go to” platform for NOSQL, the “no brainer” choice, and also that the only viable competitor to them right now is open source. But “open source” does NOT provide the security, scalability, search-ability, flexibility, or “plug and play” out of the box capabilities. MDB just works, is safe, and is super-scalable…and that is what is required right now.
Until such time as I see a change in MDB’s story or a viable competitor who can challenge them and their growth trajectory (ORCL is too big and can’t grow fast enough at this point for me to consider them anything but a potential acquirer of MDB), I am very optimistic MDB can continue to grow and thrive in this accelerated digital transformation. Regardless, I am super grateful for the phenomenal returns I’ve enjoyed as Wall Street recognizes this company for their unique position, growth, first mover advantage and excellent management in this space.
As always, very grateful for your constructive feedback and to the many intelligent, gifted and generous individuals that regularly contribute to this awesome board. And of course, a big shout out to Saul for creating it and sharing his own wisdom and years of experience!