MongoDB Continues to Win With Atlas
The data that companies need to analyze is changing. Rather than just organizing information into tidy rows and columns for SQL queries, users and developers are now looking for databases to be more adaptable, so that they can access and build upon the wealth of unstructured data.
MongoDB (NASDAQ: MDB) provides the necessary flexible solution. Its general-purpose and open-source databases are being used to create company-specific applications. Its business has performed incredibly well, and the market has rewarded its accomplishments. Its stock has doubled year to date.
Can the company's momentum continue? To find out, let's take a closer look at its recently reported first-quarter results.
Check out the latest earnings call transcript for MongoDB.
MongoDB first-quarter results: The raw numbers
What happened with MongoDB this quarter?
MongoDB continues to gain traction in the mass market, while also making the pie bigger with existing customers:
- Revenue grew 78% to $89.4 million, driven by a 82% increase in subscription revenue to $84 million. The growth rate of the company's top line actually accelerated sequentially; in the fourth quarter, it grew total revenue by 71% and subscription revenue by 73%.
- Gross margin was 68%, down 500 basis points from 73% in the first quarter of last year. The reduction in gross margin was largely due to an increasing number of customers using Atlas, as well as customers who were brought in from Mongo's acquisition of mLab.
- Atlas -- MongoDB's database-as-a-service offering -- grew revenue by more than 340% over last year. Atlas now accounts for 35% of total revenue, compared to only 14% a year ago and 32% a quarter ago.
- Overall, MongoDB now has 14,200 customers, 115% more than the 6,600 it had a year ago. Atlas has 12,300 customers, adding 900 during the quarter.
- The company said 598 customers contributed at least $100,000 in annual recurring revenue, which is up from 394 six-figure customers in the year-ago period.
- MongoDB's net annual recurring revenue expansion rate, which compares subscription revenue today to revenue from the same customers one year ago, was above 120% for the 17th consecutive quarter.
- The company expanded its partnership with Alphabet, which will now offer Atlas as part of its Google Cloud Platform.
- MongoDB acquired Realm during the quarter for $39 million. Realm is a synchronization platform that has more than 100,000 active developers.
What management had to say
President and CEO Dev Ittycheria drew special attention to the accolades his business has been winning lately, which put it in good company with several much larger companies. During the conference call with analysts, he said:
Customers are again voting with their dollars -- and they're saying they like the flexibility offered by Atlas. Atlas can fully manage deployments on any cloud provider, which is incredibly useful as companies develop more comprehensive multicloud strategies.
Even with Atlas growing 340% over last year and now accounting for more than a third of revenue, it seems there is still plenty of room for it to grow even larger. Only 4% of MongoDB's customers are spending more than $100,000 annually. Atlas is a usage-based service, which is based largely on the size and number of servers used. So as existing customers grow, so will Atlas' usage and MongoDB's revenues.
In addition to that, it appears the company could have a very large pond to go fishing for new customers. As I mentioned in March, its free community version has been downloaded more than 60 million times, which indicates that a huge number of non-professionals (i.e., small businesses) are experimenting with its products. MongoDB hasn't even begun to fully realize its greater market potential. IDC expects the worldwide database software market to grow from $64 billion in 2019 to $98 billion in 2023. That means that even with 78% sales growth, it still has less than 1% penetration in the database industry.
MongoDB again lost money on both an operating and net basis, though it did generate positive free cash flow for the first time this quarter. Management guided for $375 million to $381 million in revenue for fiscal 2020, which is a 3% boost to its previous estimates and would represent approximately 41% growth over the previous year.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Simon Erickson owns shares of MongoDB. The Motley Fool recommends GOOGL, GOOG, MSFT, and MongoDB. The Motley Fool has a disclosure policy.