No. of Recommendations: 59
MongoDB checklist

Since I ran PVTL through my Sales growth checklist (, I figured I would run MDB through the checklist as well as it is a significant holding for me.

Here again is the checklist:

1. Strong sales growth guidance over the next year (40% plus)

Total Q1 revenue was increased 49% year-over-year, subscription revenue increased 53% year-over-year and Atlas grew 400% year-over-year.

2. A large addressable market (TAM)

The TAM was $44.9B in 2016 and is estimated to be $63.3B by 2020.

3. A TAM that is expected to grow significantly

See #2 with the TAM growing 9% CAGR through 2020.

4. A product that customers love

Customers love MDB because they improve developer productivity and allow them to use their DB more efficiently. There are a lot of happy customers listed on their site here:

5. A strong dollar expansion rate (over 100%)

The dollar expansion rate has been above 120% over the last 12 quarters.

6. A lot of recurring revenue

Subscription revenue made up 92.5% of total Q1 revenue, so a lot of recurring revenue.

Now for the non-sales growth items:

1. A smaller market cap, preferable less than $10B – obviously it’s much easier to have a $2B company grow into a $20B company than a $200B company grow into a $2T company

Market cap is $2.5B

2. High margins

Gross margins of 72.6% for Q1, which is decent.

3. Growing profitability – not only do we want to see strong margins, but increasing margins. This also demonstrates pricing power and scale.

Gross margins are the same as last year, so it would be good to see some improvement over time.

4. Light asset models – no way to have really high margins with a lot of fixed assets on the books. Software companies have this and as they get larger, they become more profitable as their variable costs decrease per product sold (scale)

With high subscription revenue, they are definitely asset light.

5. Little or no debt

As of April 30, 2018, MongoDB had no debt and $271.5 million in cash, cash equivalents, short-term investments and restricted cash. The company just completed a $250M convertible note, so they should now have over $500M.

6. Not a ton of stock comp – it’s tough to have the UBNT model where there is hardly any stock comp, but I prefer not to see dilution over 10% per year

Total stock-based compensation expense for Q1 was $7.6M, so annualized that comes to $30.4M, which is not overly significant for a $2.5B market cap company.

7. High inside ownership – love to see founder led companies with larger ownership of stock. This obviously aligns their interests with fellow shareholders.

The CEO owns 5.4% of the shares, CTO and co-founder owns 4.8%, the Chairman and cofounder owns 5.9%. Management and the Board owns 40% in total but there are two Board members that own 20% who represent Sequoia Capital and Flybridge Capital. Even without these 2 Board members, the rest of the team owns 20% with the CEO, CTO and Chairman owning between 5-6% each.

Overall, MDB does very well on the checklist. It would be nice see margins improve over time and maintaining the dollar retention rate over 120.

In terms of valuation, the enterprise value is around $2B with a market cap of $2.5B and around $500M in cash (after the cash received from the recent convertible). Sales are forecasted to be $220M this year, so EV/Sales is around 9.1, so I don't think they are overvalued at current prices.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.