Inside MongoDB’s IPO Documents

MongoDB publicly filed to go public today, following a period when it was known that the company had filed privately.

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The firm is a richly funded unicorn, having raised more than $300 million while private. In fact, during its Series F, the company raised another $80 million, bringing its post-money valuation to $1.6 billion.

As a subscription-focused unicorn, MongoDB follows in well-known and deeply-trod steps like Box and Okta to the public markets. Given the wealth of information we have accreted from various SaaS IPOs of recent years, we can benchmark the company.

Let’s begin.

Financial Basics

Founded in 2007 according to Crunchbase, MongoDB has grown to generate quarterly revenue north of $30 million. However, that growth has come with stiff costs. The firm remains deeply unprofitable, despite having had a decade for it annual recurring revenue (ARR) to compound.

Let’s go through the company’s vitals to ground ourselves, starting with revenue, and revenue growth:

• MongoDB H1’16 revenue: $45.12 million.
• MongoDB H1’17 revenue: $67.99 million.
• Percent change: +50.7 percent.

And, the company’s ensuing net losses:

• MongoDB H1’16 net loss:$45.33 million.
• MongoDB H1’17 net loss: $45.77 million.
• Percent change: +0.97 percent.

Combining the two, let’s take a look at net margins:

• MongoDB H1’16 net margin: -100.5 percent.
• MongoDB H1’17 net margin: -67.3 percent.
• Raw Percentage Improvement: +33.2 percent.

Quickly, we can see that the company grew by just over half, managed to largely stay its losses, and thus improve its margins from a flat negative one hundred percent when taking all costs into account, to a slightly less painful negative two-thirds.

This is what you want to see from companies that are hoping for a growth multiple. If you can stall or slow your losses’ growth while expanding your revenue, your margins improved. That’s the first line you have to draw to illustrate a path to profitability.

However, problems exist. The company’s most recent quarterly performance includes some signals that are less than stellar. In fact, MongoDB’s profitability worsened in the most recent quarter. In the three months ending July 31, the company brought in record revenue of $35.6 million. However, the firm managed lost $26.1 million in the period, also a record.

Notably, MongoDB had revenue of $32.4 million in the first quarter and losses of just $19.7 million. So, the company lost quite a bit more in the quarter to achieve the record revenue result. If investors will look more at its H1’16 to H1’17 comparison than its sequential, quarterly results remains to be seen.

Margin Questions

As noted in a tweetstorm on the matter, we need to examine MongoDB’s share-based costs to see if we are being too rude to its losses.

The company did spend more in its most recent quarter on share-based compensation (SBC) than in any quarter since its fiscal first of 2016 (ending April 30 of that year), when it spent over $7.7 million on the stuff. In its most recent, the figure was $4.9 million. Still, the $4.9 million was a local maximum of sorts, coming in the highest of the last 5 quarters. But every quarter since the fiscal first of calendar 2016 has had more than $4 million in share-based costs, and less than $5 million.

That in hand, we can look at the company’s net losses as a percentage of revenue without too many caveats. Quickly, the firm no longer has net losses of more than 100 percent of its revenue. The last quarter it put that sort of paint up was the second fiscal quarter of calendar 2016. Since then, the company has lost (net) 74 percent of its revenue, 73 percent, 60 percent, and 74 percent. So MongoDB, in its most recent quarter, is back to year-ago net loss percentages as measured from its topline down.

Cash

Recalling that MongoDB raised hundreds of millions of dollars to date, let’s see what it has in the bank: $92.5 million. Given that the company burned $26.9 million in operational cash during the first half of 2017, that’s pretty good. That pace of operational cash burn was up year-over-year, but it remains ok compared to its cash position and expected IPO intake.

MongoDB marked a $100 million result on its S-1, a traditional placeholder number. It could go up or down.

Valuation

As noted, MongoDB’s last private valuation was $1.6 billion, post-money.

Mongo’s trailing revenue works out to $124.2 million. That, stacked against its prior valuation gives us a revenue multiple of 12.88, which is incredibly rich by modern standards. If we use its most recent quarter, annualize the result, and then derive the same multiple, MongoDB would command a multiple of just over 11.2.

That still seems rich.

So now the question becomes what investors want to pay for MongoDB’s unprofitable revenue, and roughly 50 percent growth. This seems like a critical IPO, as it could help lay the groundwork for 2018 SaaS IPOs.

We’ll see.