MONGODB, INC. Unless the context otherwise indicates, references in this report to the terms "MongoDB ," "the Company," "we," "our" and "us" refer toMongoDB, Inc. , its divisions and its subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our interim unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year endedJanuary 31, 2022 (the "2022 Form 10-K"). All information presented herein is based on our fiscal calendar year, which endsJanuary 31 . Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years endedJanuary 31 and the associated quarters, months and periods of those fiscal years. This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions or variations, including our expectations regarding our future growth opportunity, revenue and revenue growth, investments, strategy, operating expenses and the anticipated impact of the global economic uncertainty and financial market conditions, caused by the ongoing COVID-19 pandemic and the macroeconomic environment, on our business, results of operations and financial condition. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors," set forth in Part 2, Item 1A of this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Our corporate website is located at www.mongodb.com. We make available free of charge, on or through our corporate website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with, or furnishing such reports to, theSecurities and Exchange Commission ("SEC"). Information contained on our corporate website is not part of this Quarterly Report on Form 10-Q or any other report filed with or furnished to theSEC .
Overview
MongoDB is the leading modern, general purpose database platform. Our robust platform enables developers to build and modernize applications rapidly and cost-effectively across a broad range of use cases. Organizations can deploy our platform at scale in the cloud, on-premise, or in a hybrid environment. Through our unique document-based architecture, we are able to address the needs of organizations for performance, scalability, flexibility and reliability while maintaining the strengths of legacy databases. Software applications continue to redefine how organizations across industries engage with their customers, operate their businesses and compete with each other. A database is at the heart of every software application. As a result, selecting a database is a highly strategic decision that directly affects developer productivity, application performance and organizational competitiveness. Our platform addresses the performance, scalability, flexibility and reliability demands of modern applications while maintaining the strengths of legacy databases. Our business model combines the developer mindshare and adoption benefits of open source with the economic benefits of a proprietary software subscription business model.MongoDB is headquartered inNew York City and our total headcount increased to 4,240 as ofJuly 31, 2022 , from 2,934 as ofJuly 31, 2021 . We generate revenue primarily from sales of subscriptions, which accounted for 96% of our total revenue for each of the three and six months endedJuly 31, 2022 andJuly 31, 2021 . MongoDB Atlas is our hosted multi-cloud database-as-a-service ("DBaaS") offering that includes comprehensive infrastructure and management, which we run and manage in the cloud. During the three and six months endedJuly 31, 2022 , MongoDB Atlas revenue represented 64% and 62%, respectively, as compared to 56% and 54% of our total revenue during the three and six months endedJuly 31, 2021 , respectively, reflecting the continued growth of MongoDB Atlas since its introduction inJune 2016 . We have experienced strong growth in self-serve customers of MongoDB Atlas. These customers 19
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MONGODB, INC. are charged monthly in arrears based on their usage. In addition, we have also seen growth in MongoDB Atlas customers sold by our sales force. These customers typically sign annual contracts and pay in advance or are invoiced monthly in arrears based on usage. MongoDB Enterprise Advanced is our proprietary commercial database server offering for enterprise customers that can run in the cloud, on-premise or in a hybrid environment. MongoDB Enterprise Advanced revenue represented 28% and 31% of our subscription revenue for the three and six months endedJuly 31, 2022 , respectively, and 36% and 38% of our subscription revenue for the three and six months endedJuly 31, 2021 , respectively. We sell subscriptions directly through our field and inside sales teams, as well as indirectly through channel partners. The majority of our subscription contracts are one year in duration and are invoiced upfront. When we enter into multi-year subscriptions, we typically invoice the customer on an annual basis. Many of our enterprise customers initially get to know our software by using Community Server, which is our free-to-download version of our database that includes the core functionality developers need to get started withMongoDB without all the features of our commercial platform. Our platform has been downloaded from our website more than 300 million times sinceFebruary 2009 and over 100 million times in the last 12 months alone. We also offer a free tier of MongoDB Atlas, which provides access to our hosted database solution with limited processing power and storage, as well as certain operational limitations. As a result, with the availability of both Community Server and MongoDB Atlas free tier offerings, our direct sales prospects are often familiar with our platform and may have already built applications using our technology. A core component of our growth strategy for MongoDB Atlas and MongoDB Enterprise Advanced is to convert developers and their organizations who are already using Community Server or the free tier of MongoDB Atlas to become customers of our commercial products and enjoy the benefits of either a self-managed or hosted offering. We also generate revenue from services, which consist primarily of fees associated with consulting and training services. Revenue from services accounted for 4% of our total revenue for each of the three and six months endedJuly 31, 2022 andJuly 31, 2021 . We expect to continue to invest in our services organization as we believe it plays an important role in accelerating our customers' realization of the benefits of our platform, which helps drive customer retention and expansion. We believe the market for our offerings is large and growing. According to IDC, the worldwide database software market, which it refers to as the data management software market, is forecast to be approximately$85 billion in 2022 growing to approximately$138 billion in 2026, representing a 13% compound annual growth rate. We have experienced rapid growth and have made substantial investments in developing our platform and expanding our sales and marketing footprint. We intend to continue to invest heavily to grow our business to take advantage of our market opportunity rather than optimizing for profitability or cash flow in the near term.
Impact of the Ongoing COVID-19 Pandemic
The ongoing COVID-19 pandemic has continued to impactthe United States ("U.S.") and the world. The full extent of the impact of the ongoing COVID-19 pandemic on our future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact of new variants of the virus that cause COVID-19; the public health measures taken by authorities and other entities to contain and treat COVID-19; the actions taken to effect a widespread, global roll-out of the available vaccines and the efficacy and durability of such vaccines; and the impact of the COVID-19 pandemic on the global economy and on our current and prospective customers, employees, vendors and other parties with whom we do business, all of which are uncertain and cannot be predicted. In 2020, we adopted several measures in response to the COVID-19 pandemic, including temporarily requiring employees to work remotely, suspending non-essential travel by our employees, and replacing in-person marketing events (including our annual developer conference) with virtual events. In 2021, we began to re-open our offices inthe United States and certain other locations globally for employees to voluntarily return. InApril 2022 we moved forward with our return to office plan, which encompasses a hybrid approach to in-office attendance based on the different needs of teams across the company. Business travel resumed during 2021 on a voluntary basis and we started to hold in-person marketing events. During the three months endedJuly 31, 2022 , we experienced an increase in business travel, in-person marketing events, and office-related costs. We expect these and other costs to increase during the year endedJanuary 31, 2023 and result in higher charges compared to the prior year. We continue to monitor the developments of the COVID-19 pandemic and we may adjust our policies as may be required or recommended by federal, foreign, state or local authorities. We also continue to evaluate the nature and extent of the impact of COVID-19 on our business. For further discussion of the potential impacts of the ongoing COVID-19 pandemic on our business, operating results, and financial condition, see 20
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the section titled "Risk Factors" included in Part II, Item 1A of this Quarterly Report on Form 10-Q. Other factors affecting our performance are discussed below, although we caution you that the ongoing COVID-19 pandemic may also impact these factors.
Key Factors Affecting Our Performance
Growing Our Customer Base and Expanding Our Global Reach
We are intensely focused on continuing to grow our customer base. We have invested, and expect to continue to invest, heavily in our sales and marketing efforts and developer community outreach, which are critical to driving customer acquisition. As ofJuly 31, 2022 , we had over 37,000 customers across a wide range of industries and in over 100 countries, compared to over 29,000 customers as ofJuly 31, 2021 . All affiliated entities are counted as a single customer and our definition of "customer" excludes users of our free offerings. As ofJuly 31, 2022 , we had over 5,400 customers that were sold through our direct sales force and channel partners, as compared to over 3,600 such customers as ofJuly 31, 2021 . These customers, which we refer to as our Direct Sales Customers, accounted for 86% and 87% of our subscription revenue for the three and six months endedJuly 31, 2022 , respectively, and 84% of our subscription revenue for both the three and six months endedJuly 31, 2021 . The percentage of our subscription revenue from Direct Sales Customers increased during both the three and six months endedJuly 31, 2022 , in part due to existing self-serve customers of MongoDB Atlas becoming Direct Sales Customers. We are also focused on increasing the number of overall MongoDB Atlas customers as we emphasize the on-demand scalability of MongoDB Atlas by allowing our customers to consume the product with minimal commitment. We had over 35,500 MongoDB Atlas customers as ofJuly 31, 2022 compared to over 27,500 as ofJuly 31, 2021 . The growth in MongoDB Atlas customers included new customers toMongoDB and existing MongoDB Enterprise Advanced customers adding incremental MongoDB Atlas workloads. In an effort to expand our global reach, inOctober 2019 , we announced a partnership withAlibaba Cloud to offer an authorizedMongoDB -as-a-service solution allowing customers ofAlibaba Cloud to use this managed offering from their data centers globally. We expanded our reach inChina inFebruary 2021 when we announced the launch of a global partnership withTencent Cloud that allows customers to easily adopt and useMongoDB -as-a-Service across Tencent's global cloud infrastructure.
Increasing Adoption of MongoDB Atlas
MongoDB Atlas, our hosted multi-cloud offering, is an important part of our run-anywhere strategy. To accelerate the adoption of this database-as-a-service offering, we provide tools to easily migrate existing users of our Community Server offering to MongoDB Atlas. We have also expanded our introductory offerings for MongoDB Atlas, including a free tier, which provides limited processing power and storage in order to drive usage and adoption ofMongoDB Atlas among developers. Our MongoDB Atlas free tier offering is available on all three major cloud providers (Amazon Web Services ("AWS"), Google Cloud Platform ("GCP") and Microsoft Azure) inNorth America ,Europe andAsia Pacific . In addition, MongoDB Atlas is available onAWS Marketplace , making it easier for AWS customers to buy and consume MongoDB Atlas. Our business partnership with GCP provides deeper product integration and unified billing for GCP customers who are also MongoDB Atlas customers and offers GCP customers a seamless integration between MongoDB Atlas and GCP. The availability of MongoDB Atlas on theMicrosoft Azure Marketplace offers unified billing for joint customers of MongoDB Atlas and Microsoft and makes it easier for established Azure customers to purchase and use MongoDB Atlas. We have also expanded the functionality available in MongoDB Atlas beyond that of our Community Server offering. We expect this will drive further adoption of MongoDB Atlas as companies migrate mission-critical applications to the public cloud. The enterprise capabilities that we have introduced to MongoDB Atlas include advanced security features, enterprise-standard authentication and database auditing. We have invested significantly in MongoDB Atlas and our ability to drive the adoption of MongoDB Atlas is a key component of our growth strategy.
Retaining and Expanding Revenue from Existing Customers
The economic attractiveness of our subscription-based model is driven by
customer renewals and increasing existing customer subscriptions over time,
referred to as land-and-expand. We believe that there is a significant
opportunity to drive additional sales to existing customers, and expect to
invest in sales and marketing and customer success personnel and activities to
achieve additional revenue growth from existing customers. If an application
grows and requires additional
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MONGODB, INC. capacity, our customers increase their usage of our platform. Growth of an application is impacted by a number of factors including the macroeconomic environment. During the three and six months endedJuly 31, 2022 , we believe we experienced a negative impact from the macroeconomic environment on the growth of existing applications, which affected our revenue growth. We expect the macroeconomic environment to continue to negatively impact our revenue growth for the remainder of the year. In addition, our customers expand their subscriptions to our platform as they migrate additional existing applications or build new applications, either within the same department or in other lines of business or geographies. Also, as customers modernize their information technology infrastructure and move to the cloud, they may migrate applications from legacy databases. Our goal is to increase the number of customers that standardize on our database within their organization. Over time, the subscription amount for our typical Direct Sales Customer has increased. We calculate annualized recurring revenue ("ARR") and annualized monthly recurring revenue ("MRR") to help us measure our subscription revenue performance. ARR includes the revenue we expect to receive from our customers over the following 12 months based on contractual commitments and, in the case of Direct Sales Customers of MongoDB Atlas, by annualizing the prior 90 days of their actual consumption of MongoDB Atlas, assuming no increases or reductions in their subscriptions or usage. For all other customers of our self-serve products, we calculate annualized MRR by annualizing the prior 30 days of their actual consumption of such products, assuming no increases or reductions in usage. ARR and annualized MRR exclude professional services. The number of customers with$100,000 or greater in ARR and annualized MRR was 1,462 and 1,126 as ofJuly 31, 2022 and 2021, respectively. Our ability to increase sales to existing customers will depend on a number of factors, including customers' satisfaction or dissatisfaction with our products and services, competition, pricing, economic conditions or overall changes in our customers' spending levels. We also examine the rate at which our customers increase their spend with us, which we call net ARR expansion rate. We calculate net ARR expansion rate by dividing the ARR at the close of a given period (the "measurement period"), from customers who were also customers at the close of the same period in the prior year (the "base period"), by the ARR from all customers at the close of the base period, including those who churned or reduced their subscriptions. For Direct Sales Customers included in the base period, measurement period or both such periods that were self-serve customers in any such period, we also include annualized MRR from those customers in the calculation of the net ARR expansion rate. Our net ARR expansion rate has consistently been over 120% demonstrating our ability to expand within existing customers.
Components of Results of Operations
Revenue
Subscription Revenue. Our subscription revenue is comprised of term licenses and hosted as-a-service solutions. Subscriptions to term licenses include technical support and access to new software versions on a when-and-if available basis. Revenue from our term licenses is recognized upfront for the license component and ratably for the technical support and when-and-if available update components. Associated contracts are typically billed annually in advance. Revenue from our hosted asaservice solutions is primarily generated on a usage basis and is billed either in arrears or paid upfront. The majority of our subscription contracts are one year in duration. When we enter into multi-year subscriptions, we typically invoice the customer on an annual basis. Our subscription contracts are generally non-cancelable and non-refundable.
Services Revenue. Services revenue is comprised of consulting and training services and is recognized over the period of delivery of the applicable services. We recognize revenue from services agreements as services are delivered.
We expect our revenue may vary from period to period based on, among other things, the timing and size of new subscriptions, customer usage patterns, the proportion of term license contracts that commence within the period, the rate of customer renewals and expansions, delivery of professional services, the impact of significant transactions and seasonality of or fluctuations in usage for our consumptionbased customers.
Cost of Revenue
Cost of Subscription Revenue. Cost of subscription revenue primarily includes third-party cloud infrastructure expenses for our hosted as-a-service solutions. We expect our cost of subscription revenue to increase in absolute dollars as our subscription revenue increases and, depending on the results ofMongoDB Atlas, our cost of subscription revenue may increase as a percentage of subscription revenue as well. Cost of subscription revenue also includes personnel costs, including salaries, bonuses and benefits and stock-based compensation, for employees associated with our subscription arrangements principally related to technical support and allocated shared costs, as well as depreciation and amortization. 22
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MONGODB, INC. Cost of Services Revenue. Cost of services revenue primarily includes personnel costs, including salaries, bonuses and benefits, and stockbased compensation, for employees associated with our professional service contracts, as well as, travel costs, allocated shared costs and depreciation and amortization. We expect our cost of services revenue to increase in absolute dollars as our services revenue increases.
Gross Profit and Gross Margin
Gross Profit. Gross profit represents revenue less cost of revenue.
Gross Margin. Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services, the mix of products sold, transaction volume growth and the mix of revenue between subscriptions and services. We expect our gross margin to fluctuate over time depending on the factors described above and, to the extent MongoDB Atlas revenue increases as a percentage of total revenue, our gross margin may decline as a result of the associated hosting costs of MongoDB Atlas.
Operating Expenses
Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. Personnel costs are the most significant component of each category of operating expenses. Operating expenses also include travel and related costs and allocated overhead costs for facilities, information technology and employee benefit costs. Sales and Marketing. Sales and marketing expense consists primarily of personnel costs, including salaries, sales commission and benefits, bonuses and stockbased compensation. These expenses also include costs related to marketing programs, travelrelated expenses and allocated overhead. Marketing programs consist of advertising, events, corporate communications, and brandbuilding and developercommunity activities. We expect our sales and marketing expense to increase in absolute dollars over time as we expand our sales force and increase our marketing resources, expand into new markets and further develop our self-serve and partner channels. Research and Development. Research and development expense consists primarily of personnel costs, including salaries, bonuses and benefits, and stockbased compensation. It also includes amortization associated with intangible acquired assets and allocated overhead. We expect our research and development expenses to continue to increase in absolute dollars, as we continue to invest in our platform and develop new products. General and Administrative. General and administrative expense consists primarily of personnel costs, including salaries, bonuses and benefits, and stockbased compensation for administrative functions including finance, legal, human resources and external legal and accounting fees, as well as allocated overhead. We expect general and administrative expense to increase in absolute dollars over time as we continue to invest in the growth of our business, as well as incur the ongoing costs of compliance associated with being a publicly-traded company.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income, interest expense, gains and losses on investments and gains and losses from foreign currency transactions.
Provision for Income Taxes
Provision for income taxes consists primarily of state income taxes in
We account for income taxes and the related accounts under the liability method. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted rates expected to be in effect during the year in which the basis differences reverse. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. We have maintained a valuation allowance onU.S. ,U.K. andIreland net deferred tax assets, as it is more likely than not that some or all of the deferred tax assets will not be realized. 23
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MONGODB, INC. We continue to monitor and interpret the impact of proposed and enacted global tax legislation, such as theU.S. Tax Cuts and Jobs Act of 2017 ("Tax Act"). To date, based on the net operating losses and full valuation allowances against our two most significant tax jurisdictions,the United States andIreland , the impact of global enacted and proposed legislation has not had an impact on the tax provisions of the financial statements. We continue to monitor to ensure both our financial results and our related tax disclosures are in compliance with any tax legislation.
Three and Six Months Ended
For the three months endedJuly 31, 2022 , our total revenue increased to$303.7 million as compared to$198.7 million for the three months endedJuly 31, 2021 , primarily driven by an increase in subscription revenue from our Direct Sales Customers. Our net loss increased to$118.9 million for the three months endedJuly 31, 2022 as compared to$77.1 million for the three months endedJuly 31, 2021 , as improvement in gross profit was offset by higher sales and marketing spend and research and development costs during the three months endedJuly 31, 2022 . For the six months endedJuly 31, 2022 , our total revenue increased to$589.1 million as compared to$380.4 million for the six months endedJuly 31, 2021 , primarily driven by an increase in subscription revenue from our Direct Sales Customers. Our net loss increased to$196.2 million for the six months endedJuly 31, 2022 as compared to$141.1 million for the six months endedJuly 31, 2021 , primarily driven by increased sales and marketing and research and development costs during the three months endedJuly 31, 2022 .
Our operating cash flow was
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Results of Operations
The following tables set forth our results of operations for the periods
presented in U.S. dollars (unaudited, in thousands) and as a percentage of our
total revenue. Percentage of revenue figures are rounded and therefore may not
subtotal exactly.
Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021
Consolidated Statements of Operations Data:
Revenue:
Subscription $ 291,607 $ 191,381 $ 566,188 $ 365,951
Services 12,053 7,366 22,919 14,444
Total revenue 303,660 198,747 589,107 380,395
Cost of revenue:
Subscription(1) 71,435 50,955 136,004 96,357
Services(1) 16,842 9,747 30,488 18,873
Total cost of revenue 88,277 60,702 166,492 115,230
Gross profit 215,383 138,045 422,615 265,165
Operating expenses:
Sales and marketing(1) 181,598 109,377 331,866 207,267
Research and development(1) 108,037 72,396 204,409 137,147
General and administrative(1) 40,591 28,803 77,123 54,728
Total operating expenses 330,226 210,576 613,398 399,142
Loss from operations (114,843) (72,531) (190,783) (133,977)
Other expense, net (973) (3,064) (1,181) (6,986)
Loss before provision for income taxes (115,816) (75,595) (191,964) (140,963)
Provision for income taxes 3,049 1,538 4,195 162
Net loss $ (118,865) $ (77,133) $ (196,159) $ (141,125)
(1) Includes stockbased compensation expense as follows (unaudited, in
thousands):
Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021
Cost of revenue-subscription $ 5,009 $ 3,399 $ 9,476 $ 6,389
Cost of revenue-services 2,560 1,465 4,772 2,952
Sales and marketing 35,653 21,082 66,187 39,958
Research and development 40,642 23,687 76,125 44,022
General and administrative 12,690 8,072 23,560 15,298
Total stockbased compensation expense
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Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021
Percentage of Revenue Data:
Revenue:
Subscription 96 % 96 % 96 % 96 %
Services 4 % 4 % 4 % 4 %
Total revenue 100 % 100 % 100 % 100 %
Cost of revenue:
Subscription 23 % 26 % 23 % 25 %
Services 6 % 5 % 5 % 5 %
Total cost of revenue 29 % 31 % 28 % 30 %
Gross profit 71 % 69 % 72 % 70 %
Operating expenses:
Sales and marketing 60 % 55 % 56 % 55 %
Research and development 36 % 36 % 35 % 36 %
General and administrative 13 % 14 % 13 % 14 %
Total operating expenses 109 % 105 % 104 % 105 %
Loss from operations (38) % (36) % (32) % (35) %
Other expense, net - % (2) % - % (2) %
Loss before provision for income taxes (38) % (38) % (32) % (37) %
Provision for income taxes 1 % 1 % 1 % - %
Net loss (39) % (39) % (33) % (37) %
Comparison of the Three Months Ended
Revenue
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Subscription $ 291,607 $ 191,381 $ 100,226 52 %
Services 12,053 7,366 4,687 64 %
Total revenue $ 303,660 $ 198,747 $ 104,913 53 %
Total revenue growth reflects increased demand for our platform and related
services. Subscription revenue increased by $100.2 million primarily due to an
increase of $90.9 million from our Direct Sales Customers, inclusive of Direct
Sales Customers who were self-serve customers of MongoDB Atlas in the prior-year
period. The increase in services revenue was driven primarily by the increased
delivery of consulting services.
Cost of Revenue, Gross Profit and Gross Margin Percentage
Three Months Ended July 31 , Change
(unaudited, in thousands) 2022 2021 $ % Subscription cost of revenue$ 71,435 $ 50,955 $ 20,480 40 % Services cost of revenue 16,842 9,747 7,095 73 % Total cost of revenue 88,277 60,702 27,575 45 % Gross profit$ 215,383 $ 138,045 $ 77,338 56 % Gross margin 71 % 69 % Subscription 76 % 73 % Services (40) % (32) % 26
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MONGODB, INC. The increase in subscription cost of revenue was primarily due to a$16.2 million increase in thirdparty cloud infrastructure costs, including costs associated with the growth of MongoDB Atlas, although we continue to realize efficiencies in our third-party cloud infrastructure costs as we scale MongoDB Atlas. In addition, subscription cost of revenue was higher due to a$3.1 million increase in personnel costs and stock-based compensation associated with increased headcount in our support organization. The increase in services cost of revenue was primarily due to a$4.3 million increase in personnel costs and stock-based compensation associated with increased headcount in our services organization, and a$1.4 million increase in costs driven by an increase in the volume of consulting and training services. Total headcount in our support and services organizations increased 38% fromJuly 31, 2022 toJuly 31, 2021 .
Our overall gross margin increased to 71%. Our subscription gross margin benefited from efficiencies realized in managing our third-party cloud infrastructure costs, offset by the negative impact from the increasing percentage of revenue from MongoDB Atlas. The impact of higher services personnel costs and stock based compensation and lower utilization rate resulted in a lower services gross margin.
Operating Expenses
Sales and Marketing
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Sales and marketing $ 181,598 $ 109,377 $ 72,221 66 %
The increase in sales and marketing expense included $38.1 million from higher
personnel costs and stock-based compensation, driven by an increase in our sales
and marketing headcount to 2,159 as of July 31, 2022 from 1,380 as of July 31,
2021 , which includes non-quota-carrying hires in sales operations, customer
success and marketing. Sales and marketing expense also increased $24.9 million
from costs associated with our higher headcount, including higher travel costs
related to in-person events, higher commissions expense and higher computer
hardware and software expenses. In addition, sales and marketing expenses
increased by $7.0 million due to increased spending on marketing programs,
including the return to in-person attendance for our MongoDB World event.
Research and Development
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Research and development $ 108,037 $ 72,396 $ 35,641 49 %
The increase in research and development expense was primarily driven by a
$29.1 million increase in personnel costs and stock-based compensation as we
grew our research and development headcount by 31%. Research and development
expense also increased due to higher computer hardware and software expenses,
higher travel costs and higher office-related expenses driven by higher
headcount. Travel costs and office-related expenses increased also due to the
easing of restrictions related to the COVID-19 pandemic.
General and Administrative
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
General and administrative $ 40,591 $ 28,803 $ 11,788 41 %
The increase in general and administrative expense was due to higher costs to
support the growth of our business and to maintain compliance as a public
company. In particular, these higher costs were driven by an increase in general
and administrative personnel headcount resulting in an increase of $9.0 million
in personnel costs and stock-based compensation. In addition, general and
administrative expense increased due to higher professional services fees and
higher travel costs. The increase in travel costs was primarily driven by higher
headcount and the easing of restrictions related to the COVID-19 pandemic.
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Other Expense, Net
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Other expense, net $ (973) $ (3,064) $ 2,091 (68) %
Other expense, net for the three months ended
Provision for Income Taxes
Three Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Provision for income taxes $ 3,049 $ 1,538 $ 1,511 98 %
The provision for income taxes during the three months ended July 31, 2022 was
primarily due to global income and the associated foreign taxes as the Company
continues its global expansion. The provision for income taxes during the three
months ended July 31, 2021 was primarily due to foreign taxes as we continued
our global expansion.
Comparison of the Six Months Ended
Revenue
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Subscription $ 566,188 $ 365,951 $ 200,237 55 %
Services 22,919 14,444 8,475 59 %
Total revenue $ 589,107 $ 380,395 $ 208,712 55 %
Total revenue growth reflects increased demand for our platform and related
services. Subscription revenue increased by $200.2 million primarily due to an
increase of $182.8 million from our Direct Sales Customers, inclusive of the
impact from Direct Sales Customers who were self-serve customers of MongoDB
Atlas in the prior-year period. The growth in services revenue was driven
primarily by the increased delivery of consulting services.
Cost of Revenue, Gross Profit and Gross Margin Percentage
Six Months Ended July 31 , Change
(unaudited, in thousands) 2022 2021 $ % Subscription cost of revenue$ 136,004 $ 96,357 $ 39,647 41 % Services cost of revenue 30,488 18,873 11,615 62 % Total cost of revenue 166,492 115,230 51,262 44 % Gross profit$ 422,615 $ 265,165 $ 157,450 59 % Gross margin 72 % 70 % Subscription 76 % 74 % Services (33) % (31) % The increase in subscription cost of revenue was primarily due to a$31.2 million increase in thirdparty cloud infrastructure costs, including costs associated with the growth of MongoDB Atlas. The increase in third-party infrastructure costs was partly offset by continued cost efficiencies realized as we scale MongoDB Atlas. In addition, subscription cost of revenue was higher due to a$6.1 million increase in personnel costs and stock-based compensation associated with increased headcount in our support organization. The increase in services cost of revenue was primarily due to a$7.3 million increase in personnel costs and stock-based compensation associated with increased headcount in our services organization, and a$2.5 million increase in costs driven by an increase in the volume of consulting and training services. Total headcount in our support and services organizations increased 38% fromJuly 31, 2021 toJuly 31, 2022 . 28
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Our overall gross margin improved to 72%. Our subscription gross margin increased to 76% as efficiencies realized in managing our third-party cloud infrastructure costs more than offset the negative margin impact from the increasing percentage of revenue from MongoDB Atlas. The impact of higher services personnel costs and stock-based compensation and lower utilization rate resulted in negative services gross margin.
Operating Expenses
Sales and Marketing
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Sales and marketing $ 331,866 $ 207,267 $ 124,599 60 %
The increase in sales and marketing expense included $70.4 million from higher
personnel costs and stock-based compensation, driven by an increase in our sales
and marketing headcount to 2,159 as of July 31, 2022 from 1,380 as of July 31,
2021 , which includes non-quota-carrying hires in sales operations, customer
success and marketing. Sales and marketing expense also increased $41.1 million
from costs associated with our higher headcount, including higher commissions
expense, higher travel costs related to in-person events and higher computer
hardware and software expenses. In addition, sales and marketing expenses
increased by $9.6 million due to increased spending on marketing programs
including the return to in-person attendance for our MongoDB World event.
Research and Development
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Research and development $ 204,409 $ 137,147 $ 67,262 49 %
The increase in research and development expense was primarily driven by a
$56.1 million increase in personnel costs and stock-based compensation as we
increased our research and development headcount by 31%. Research and
development expense also increased $9.5 million due to higher computer hardware
and software expenses, increased third-party infrastructure costs and higher
travel costs driven by higher headcount. Travel costs increased also due to the
easing of restrictions related to the COVID-19 pandemic.
General and Administrative
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
General and administrative $ 77,123 $ 54,728 $ 22,395 41 %
The increase in general and administrative expense was due to higher costs to
support the growth of our business and to maintain compliance as a public
company. In particular, these higher costs were driven by an increase in general
and administrative personnel headcount resulting in $16.5 million higher
personnel costs and stock-based compensation. In addition, general and
administrative expense increased due to higher professional services fees and
higher travel costs. The increase in travel costs was primarily driven by higher
headcount and the easing of restrictions related to the COVID-19 pandemic.
Other Expense, Net
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Other expense, net $ (1,181) $ (6,986) $ 5,805 (83) %
Other expense, net, for the six months ended July 31, 2022 decreased primarily
due to gain on investments, related to our non-marketable securities, higher
interest income from our short-term investments, as well as lower interest
expense following the redemption of convertible securities.
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Provision for Income Taxes
Six Months Ended July 31, Change
(unaudited, in thousands) 2022 2021 $ %
Provision for income taxes $ 4,195 $ 162 $ 4,033 2490 %
The provision for income taxes during the six months ended July 31, 2022 was
primarily due to global income and the associated foreign taxes as the Company
continues its global expansion. The provision for income taxes during the six
months ended July 31, 2021 was primarily the result of an increase in global
income and the associated foreign taxes partially offset by the release of the
valuation allowance as a result of goodwill recorded associated with an
immaterial business combination and the impact from the adoption of ASU 2020-06.
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Liquidity and Capital Resources
As ofJuly 31, 2022 , our principal sources of liquidity were cash, cash equivalents, shortterm investments and restricted cash totaling$1.8 billion . Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our shortterm investments consist ofU.S. government treasury securities, and our restricted cash represents collateral for our available credit on corporate credit cards. We believe our existing cash and cash equivalents and shortterm investments will be sufficient to fund our operating and capital needs for at least the next 12 months. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and historical consolidated statements of cash flows. As ofJuly 31, 2022 , we had an accumulated deficit of$1.4 billion . We expect to continue to incur operating losses, may continue to experience negative cash flows from operations in the future and may require additional capital resources to execute strategic initiatives to grow our business. Our future capital requirements and adequacy of available funds will depend on many factors, including our growth rate and any impact on it from global macroeconomic conditions, including rising interest rates and inflation, the timing and extent of spending to support development efforts, the expansion of sales and marketing and international operation activities, the timing and size of new subscription introductions and customer usage of our platform, the continuing market acceptance of our subscriptions and services and the impact of the ongoing COVID-19 pandemic on the global economy and our business, financial condition and results of operations. As the impact of the ongoing COVID-19 pandemic on the global economy and our operations continues to evolve, we will continue to assess our liquidity needs. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected. The following table summarizes our cash flows for the periods presented (unaudited, in thousands): Six Months Ended July 31, 2022 2021 Net cash used in operating activities$ (33,097) $ (9,541) Net cash provided by (used in) investing activities 196,115 (136,923) Net cash provided by financing activities 16,883 878,263 Operating Activities Cash used in operating activities during the six months endedJuly 31, 2022 was$33.1 million . This was primarily driven by our net loss of$196.2 million , which was partially offset by noncash charges of$180.1 million for stockbased compensation,$7.7 million for depreciation and amortization,$6.4 million for lease-related charges and$4.1 million for accretion of discount on our short-term investments. In addition, the continuing growth of our sales and our expanding customer base led to an increase in accounts receivable of$19.5 million and deferred commissions of$16.6 million . Cash used in operating activities during the six months endedJuly 31, 2021 was$9.5 million . This was primarily driven by our net loss of$141.1 million , which was partially offset by noncash charges of$108.6 million for stockbased compensation,$6.6 million for depreciation and amortization,$5.2 million for lease-related charges,$3.0 million for accretion of discount on our short-term investments and$2.3 million for debt issuance costs. In addition, our cash collections decreased our accounts receivable by$16.3 million and increased our deferred revenue by$9.8 million , reflecting the overall growth of our sales and our expanding customer base. Partially offsetting these benefits to our operating cash flow were decreases of$16.5 million in deferred commissions, due to commissions paid during the period.
Investing Activities
Cash provided by investing activities during the six months endedJuly 31, 2022 was$196.1 million , primarily due to proceeds from maturities of marketable securities, net of purchases, of$202.4 million . The proceeds were partially offset by$5.2 million of cash used for purchases of property and equipment and$1.1 million of additional investment in non-marketable securities. Cash used in investing activities during the six months endedJuly 31, 2021 was$136.9 million , primarily due to cash used to purchase marketable securities, net of maturities, of$129.0 million , and$4.5 million of net cash used for an immaterial acquisition. 31
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Financing Activities
Cash provided by financing activities during the six months ended July 31, 2022
was $16.9 million , due to proceeds from the issuance of common stock under the
Employee Stock Purchase Plan and exercises of stock options, partly offset by
principal repayments of finance leases.
Cash provided by financing activities during the six months ended July 31, 2021
was $878.3 million , primarily due to net proceeds of $889.2 million from our
June 2021 equity offering, which resulted in our issuance of 2,500,000 shares of
common stock at an offering price of $365 per share, the issuance of common
stock under the Employee Stock Purchase Plan, and exercises of stock options,
partly offset by cash used to repay a portion of our 2024 convertible notes upon
redemption.
Seasonality
We have in the past and expect in the future to experience seasonal fluctuations
in our revenue and operating results from time to time. We may experience
variability and reduced comparability of our quarterly revenue and operating
results with respect to the timing and nature of certain of our contracts,
particularly multi-year contracts that contain a term license. We may also
experience fluctuations as MongoDB Atlas revenue is recorded on a consumption
basis and varies with usage, including due to seasonal factors. As MongoDB Atlas
revenue continues to increase as a percentage of total revenue, these
fluctuations may have a greater impact on our results of operations. We believe
that seasonal fluctuations that we have experienced in the past may continue in
the future.
Contractual Obligations and Commitments
During the six months endedJuly 31, 2022 , there were no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in our 2022 Form 10-K. Refer to Note 6, Leases and Note 7, Commitments and Contingencies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.
Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. There have been no material changes in our critical accounting estimates from those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2022 Form 10-K.
Recent Accounting Pronouncements
None.
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