MDB - MongoDB Earnings: Pulls Forward Profitability By 12 Months

2023-06-02 05:15:54 ET

Summary

• MongoDB delivered a strong earnings report with an optimistic outlook for fiscal Q2 2024, exceeding expectations.
• MongoDB pulled forward its profitability profile by approximately one year.
• MongoDB's cloud-based platform, Atlas, has experienced rapid growth and represents 65% of its total revenues.
• MongoDB's revenue growth rates are expected to remain robust, with the guidance for fiscal Q2 2024 indicating a potential close to 30% CAGR next quarter; about 50% higher than expectations.

Investment Thesis

MongoDB ( MDB ) delighted investors with its incredibly strong outlook for its next quarter, fiscal Q2 2024. But the real icing on the cake from this earnings report is that MongoDB's underlying profitability profile has been pulled forward by approximately 1 year.

I've been following MongoDB for some time now, and I believe this is the best earnings report I remember seeing.

Despite the stock being up nearly 25% premarket, I believe there's still upside potential.

Why MongoDB? Why Now?

MongoDB is an open-source, NoSQL (non-relational) database management system. This means that rather than digesting "rigid" data, it's able to search through "always on" data.

The example I often give is this: Think of digesting data from Twitter. Data is being input at all times. Sometimes as a picture and sometimes as text. The question is how to structure this data? Or data from an e-commerce company's inventory, that's being added to and removed at all times via cloud orders?

MongoDB provides scalable and flexible data storage solutions for easy retrieval of complex data structures. Its value proposition lies in its efficient data storage solutions for real-time data processing where flexible data structures are required.

Basically, MongoDB is a database company where you can query data in different formats to gain insights.

The bull case for MongoDB is that its Atlas platform, its cloud-based database platform, continues to very rapidly grow and makes up 65% of its total revenues.

But for me, the best insight into the appeal of its platform lies in its customer adoption curve. As a point of fact, if you've read my work before you'll have seen me say countless times, follow the customer, because every other insight is a distraction to understanding the value proposition of a business. The paying customer knows best.

As a point of reference, in the quarter, MongoDB Atlas Customers were up 23% y/y to 41.6K allowing MondgoDB to state it was the strongest net new customer additions in over two years.

Revenue Growth Rates Expected to Remain Very Strong

MongoDB astounded investors with its guidance for the remainder of the year. Hold, wait. That's not quite accurate. Because in actuality, MongoDB's full-year guidance was only upwards revised by 2% relative to the guidance it had provided in the prior quarter.

What MongoDB did here is meaningfully upwards revise its outlook for fiscal Q2 2024 relative to the consensus, see below.

MongoDB's fiscal Q2 2024 was expected to grow at a sub-20% CAGR. However, this new outlook points to close to 30% CAGR.

In fact, given that MongoDB knows what analysts were expecting, there was no need to so aggressively guide for next quarter, unless they know that they can beat the high end of this guide.

In simple terms, I make the case that MongoDB's revenue growth rates could upwards accelerate and grow at +30% CAGR in fiscal Q2 2024.

Naturally, this implies that for the remainder of this fiscal year, MongoDB's revenue growth rates could be nearly double what analysts were expecting going into the quarter. What makes me say this?

Consider that for fiscal H1 2024 MongoDB is up against really tough comparisons with the prior year. But those comparisons significantly ease up in the next second half of this fiscal year.

But the good news doesn't end here.

Profitability Profile Astounds

MongoDB upwards revised the high end of its non-GAAP EPS figures by 42%. This is such a high upwards revision that it's worthwhile to get some context.

Consider this: analysts were expecting to see approximately $1.04 of EPS this year. But the guidance points to $1.56 at the high end.

In practical terms, as MongoDB headed into the earnings print yesterday, analysts' expectations for the following fiscal year, fiscal 2025, had the consensus figure at $1.55 of non-GAAP EPS.

Now, if we look at the high end for this year, it's nearly as if MongoDB just pulled forward a full year of profitability:

The Bottom Line

There's a lot to like from this report. For a stock that had gone essentially nowhere fast over the past 12 months, expectations were rather muted for MongoDB.

Now that MongoDB has pulled forward 1 year of profitability, I believe investors will be extremely keen to re-evaluate this stock.

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