Company Quick10K Filing
Quick10K
Mongodb
10-Q 2019-07-31 Quarter: 2019-07-31
10-Q 2019-04-30 Quarter: 2019-04-30
10-K 2019-01-31 Annual: 2019-01-31
10-Q 2018-10-31 Quarter: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-K 2018-01-31 Annual: 2018-01-31
10-Q 2017-10-31 Quarter: 2017-10-31
8-K 2019-08-28 Earnings, Officers, Exhibits
8-K 2019-07-10 Shareholder Vote
8-K 2019-06-05 Earnings, Exhibits
8-K 2019-03-13 Earnings, Exhibits
8-K 2018-12-21 Shareholder Rights, Other Events
8-K 2018-12-04 Earnings, Officers, Exhibits
8-K 2018-10-16 Other Events, Exhibits
8-K 2018-10-09 Enter Agreement, Other Events, Exhibits
8-K 2018-09-05 Earnings, Exhibits
8-K 2018-07-12 Shareholder Vote
8-K 2018-06-25 Enter Agreement, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2018-06-06 Earnings, Exhibits
8-K 2018-03-13 Earnings, Officers, Exhibits
PAYC Paycom 14,925
TYL Tyler Technologies 9,817
BKI Black Knight 9,200
CBLK Carbon Black 1,868
TLND Talend 1,230
TWOU 2U 1,008
SPNS Sapiens 937
MOBL MobileIron 743
IDN Intellicheck 69
OKTA Okta 0
MDB 2019-07-31
Part I-Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part Ii-Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 mdb-73119x10qxex311.htm
EX-31.2 mdb-73119x10qxex312.htm
EX-32.1 mdb-73119x10qxex321.htm
EX-32.2 mdb-73119x10qxex322.htm

Mongodb Earnings 2019-07-31

MDB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM 10-Q
___________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number: 001-38240
___________________
MONGODB, INC.
(Exact Name of Registrant as Specified in its Charter)
___________________
Delaware
 
26-1463205
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1633 Broadway
38th Floor
 
 
New York
NY
 
10019
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 646-727-4092
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share
 
MDB
 
The Nasdaq Stock Market LLC
 
 
(Nasdaq Global Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No þ
As of September 3, 2019, there were 47,098,347 shares of the registrant’s Class A common stock and 9,218,071 shares of the registrant’s Class B common stock, each with a par value of $0.001 per share, outstanding.
 



Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 




Table of Contents

PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
MONGODB, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
 
July 31, 2019
 
January 31, 2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
186,684

 
$
147,831

Short-term investments
249,369

 
318,139

Accounts receivable, net of allowance for doubtful accounts of $1,479 and $1,539 as of July 31, 2019 and January 31, 2019, respectively
66,783

 
72,808

Deferred commissions
18,093

 
15,878

Prepaid expenses and other current assets
12,444

 
11,580

Total current assets
533,373

 
566,236

Property and equipment, net
59,629

 
73,664

Operating lease right-of-use assets
11,698

 

Goodwill
55,484

 
41,878

Acquired intangible assets, net
40,102

 
15,894

Deferred tax assets
1,897

 
1,193

Other assets
39,414

 
34,611

Total assets
$
741,597

 
$
733,476

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,658

 
$
2,153

Accrued compensation and benefits
25,670

 
25,982

Operating lease liabilities
3,729

 

Other accrued liabilities
25,921

 
14,169

Deferred revenue
131,024

 
122,333

Total current liabilities
189,002

 
164,637

Deferred rent, non-current

 
2,567

Deferred tax liability, non-current
114

 
106

Operating lease liabilities, non-current
9,002

 

Deferred revenue, non-current
19,175

 
15,343

Convertible senior notes, net
223,356

 
216,858

Other liabilities, non-current
61,605

 
69,399

Total liabilities
502,254

 
468,910

Commitments and contingencies (Note 8)


 


Stockholders’ equity:
 
 
 
Class A common stock, par value of $0.001 per share; 1,000,000,000 shares authorized as of July 31, 2019 and January 31, 2019; 46,885,379 and 36,286,573 shares issued and outstanding as of July 31, 2019 and January 31, 2019, respectively
47

 
36

Class B common stock, par value of $0.001 per share; 100,000,000 shares authorized as of July 31, 2019 and January 31, 2019; 9,452,608 and 18,134,608 shares issued as of July 31, 2019 and January 31, 2019, respectively; 9,353,237 and 18,035,237 shares outstanding as of July 31, 2019 and January 31, 2019, respectively
9

 
18

Additional paid-in capital
804,224

 
754,612

Treasury stock, 99,371 shares (repurchased at an average of $13.27 per share) as of July 31, 2019 and January 31, 2019
(1,319
)
 
(1,319
)
Accumulated other comprehensive loss
(332
)
 
(174
)
Accumulated deficit
(563,286
)
 
(488,607
)
Total stockholders’ equity
239,343

 
264,566

Total liabilities and stockholders’ equity
$
741,597

 
$
733,476

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Subscription
$
94,156

 
$
55,086

 
$
178,150

 
$
101,155

Services
5,212

 
4,525

 
10,606

 
8,595

Total revenue
99,368

 
59,611

 
188,756

 
109,750

Cost of revenue:
 
 
 
 
 
 
 
Subscription
24,373

 
12,116

 
46,968

 
22,186

Services
5,829

 
4,378

 
11,406

 
8,057

Total cost of revenue
30,202

 
16,494

 
58,374

 
30,243

Gross profit
69,166

 
43,117

 
130,382

 
79,507

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
53,524

 
36,537

 
99,644

 
69,734

Research and development
37,140

 
21,430

 
68,008

 
40,075

General and administrative
16,174

 
12,254

 
30,979

 
23,481

Total operating expenses
106,838

 
70,221

 
198,631

 
133,290

Loss from operations
(37,672
)
 
(27,104
)
 
(68,249
)
 
(53,783
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
2,231

 
1,518

 
4,534

 
2,477

Interest expense
(4,940
)
 
(1,294
)
 
(9,629
)
 
(1,294
)
Other expense, net
(296
)
 
(656
)
 
(711
)
 
(1,024
)
Loss before provision for income taxes
(40,677
)
 
(27,536
)
 
(74,055
)
 
(53,624
)
Provision (benefit) for income taxes
(3,341
)
 
246

 
(3,479
)
 
713

Net loss
$
(37,336
)
 
$
(27,782
)
 
$
(70,576
)
 
$
(54,337
)
Net loss per share, basic and diluted
$
(0.67
)
 
$
(0.54
)
 
$
(1.28
)
 
$
(1.07
)
Weighted-average shares used to compute net loss per share, basic and diluted
55,647,707

 
51,185,258

 
55,186,945

 
50,784,422

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Net loss
$
(37,336
)
 
$
(27,782
)
 
$
(70,576
)
 
$
(54,337
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Unrealized gain (loss) on available-for-sale securities
21

 
30

 
79

 
(52
)
Foreign currency translation adjustment
(250
)
 
(96
)
 
(237
)
 
(129
)
Other comprehensive loss
(229
)
 
(66
)
 
(158
)
 
(181
)
Total comprehensive loss
$
(37,565
)
 
$
(27,848
)
 
$
(70,734
)
 
$
(54,518
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
 
Class A and
Class B
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balances as of January 31, 2019
54,321,810

 
$
54

 
$
754,612

 
$
(1,319
)
 
$
(174
)
 
$
(488,607
)
 
$
264,566

Cumulative effect of accounting change

 

 

 

 

 
(4,103
)
 
(4,103
)
Stock option exercises
831,901

 
1

 
6,437

 

 

 

 
6,438

Repurchase of early exercised options
(3,981
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
127

 

 

 

 
127

Vesting of restricted stock units
126,346

 

 

 

 

 

 

Stock-based compensation

 

 
14,009

 

 

 

 
14,009

Unrealized loss on available-for-sale securities

 

 

 

 
58

 

 
58

Foreign currency translation adjustment

 

 

 

 
13

 

 
13

Net loss

 

 

 

 

 
(33,240
)
 
(33,240
)
Balances as of April 30, 2019
55,276,076

 
55

 
775,185

 
(1,319
)
 
(103
)
 
(525,950
)
 
247,868

Stock option exercises
665,543

 
1

 
4,913

 

 

 

 
4,914

Repurchase of early exercised options
(209
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
70

 

 

 

 
70

Vesting of restricted stock units
206,587

 

 

 

 

 

 

Stock-based compensation

 

 
17,662

 

 

 

 
17,662

Issuance of common stock under the Employee Stock Purchase Plan
90,619

 

 
6,394

 

 

 

 
6,394

Unrealized loss on available-for-sale securities

 

 

 

 
21

 

 
21

Foreign currency translation adjustment

 

 

 

 
(250
)
 

 
(250
)
Net loss

 

 

 

 

 
(37,336
)
 
(37,336
)
Balances as of July 31, 2019
56,238,616

 
$
56

 
$
804,224

 
$
(1,319
)
 
$
(332
)
 
$
(563,286
)
 
$
239,343

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(in thousands, except share data)
(unaudited)
 
Class A and
Class B
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balances as of January 31, 2018
50,575,571

 
$
51

 
$
638,680

 
$
(1,319
)
 
$
(159
)
 
$
(389,596
)
 
$
247,657

Stock option exercises
40,723

 

 
183

 

 

 

 
183

Repurchase of early exercised options
(19,395
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
533

 

 

 

 
533

Vesting of restricted stock units
125

 

 

 

 

 

 

Stock-based compensation

 

 
7,577

 

 

 

 
7,577

Unrealized loss on available-for-sale securities

 

 

 

 
(82
)
 

 
(82
)
Foreign currency translation adjustment

 

 

 

 
(33
)
 

 
(33
)
Net loss

 

 

 

 

 
(26,555
)
 
(26,555
)
Balances as of April 30, 2018
50,597,024

 
51

 
646,973

 
(1,319
)
 
(274
)
 
(416,151
)
 
229,280

Stock option exercises
1,150,864

 
1

 
7,894

 

 

 

 
7,895

Repurchase of early exercised options
(14,000
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
302

 

 

 

 
302

Vesting of restricted stock units
75,478

 

 

 

 

 

 

Stock-based compensation

 

 
9,009

 

 

 

 
9,009

Issuance of common stock under the Employee Stock Purchase Plan
275,874

 

 
5,626

 

 

 

 
5,626

Equity component of convertible senior notes

 

 
81,683

 

 

 

 
81,683

Purchase of capped calls

 

 
(37,086
)
 

 

 

 
(37,086
)
Unrealized loss on available-for-sale securities

 

 

 

 
30

 

 
30

Foreign currency translation adjustment

 

 

 

 
(96
)
 

 
(96
)
Net loss

 

 

 

 

 
(27,782
)
 
(27,782
)
Balances as of July 31, 2018
52,085,240

 
$
52

 
$
714,401

 
$
(1,319
)
 
$
(340
)
 
$
(443,933
)
 
$
268,861

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Six Months Ended July 31,
 
2019
 
2018
Cash flows from operating activities
 
 
 
Net loss
$
(70,576
)
 
$
(54,337
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
6,029

 
1,623

Stock-based compensation
31,671

 
16,586

Amortization of debt discount and issuance costs
6,498

 
1,094

Amortization of finance right-of-use assets
1,988

 

Non-cash interest on finance lease liabilities
1,823

 

Deferred income taxes
(4,232
)
 
47

Accretion of discount on short-term investments
(2,751
)
 
(1,070
)
Change in operating assets and liabilities:
 
 
 
Accounts receivable
6,220

 
6,469

Prepaid expenses and other current assets
(125
)
 
(840
)
Deferred commissions
(7,046
)
 
(3,355
)
Operating lease right-of-use assets
1,119

 

Other long-term assets
27

 
46

Accounts payable
440

 
(394
)
Deferred rent

 
917

Accrued liabilities
8,285

 
1,957

Operating lease liabilities
(1,082
)
 

Deferred revenue
12,333

 
6,356

Net cash used in operating activities
(9,379
)
 
(24,901
)
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(1,596
)
 
(1,561
)
Acquisition, net of cash acquired
(38,629
)
 

Proceeds from maturities of marketable securities
280,000

 
118,000

Purchases of marketable securities
(209,025
)
 
(300,467
)
Net cash provided by (used in) investing activities
30,750

 
(184,028
)
Cash flows from financing activities
 
 
 
Proceeds from exercise of stock options, including early exercised stock options
11,350

 
8,106

Proceeds from the issuance of common stock under the Employee Stock Purchase Plan
6,394

 
5,626

Repurchase of early exercised stock options
(31
)
 
(309
)
Proceeds from borrowings on convertible senior notes, net of issuance costs

 
293,161

Payment for purchase of capped calls

 
(37,086
)
Proceeds from tenant improvement allowance on build-to-suit lease

 
376

Net cash provided by financing activities
17,713

 
269,874

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(233
)
 
(83
)
Net increase in cash, cash equivalents and restricted cash
38,851

 
60,862

Cash, cash equivalents and restricted cash, beginning of period
148,347

 
62,427

Cash, cash equivalents and restricted cash, end of period
$
187,198

 
$
123,289

 
 
 
 
Supplemental cash flow disclosure
 
 
 
Noncash investing and financing activities:
 
 
 
Construction in progress related to build-to-suit lease obligations
$

 
$
10,781

Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets, end of period, to the amounts shown in the statements of cash flows above
 
 
 
Cash and cash equivalents
$
186,684

 
$
122,771

Restricted cash, non-current
514

 
518

Total cash, cash equivalents and restricted cash
$
187,198

 
$
123,289

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents
MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.
Organization and Description of Business
MongoDB, Inc. (“MongoDB” or the “Company”) was originally incorporated in the state of Delaware in November 2007 under the name 10Gen, Inc. In August 2013, the Company changed its name to MongoDB, Inc. The Company is headquartered in New York City. MongoDB is the leading, modern, general purpose database platform. The Company’s robust platform enables developers to build and modernize applications rapidly and cost-effectively across a broad range of use cases. Organizations can deploy the Company’s platform at scale in the cloud, on-premise, or in a hybrid environment. In addition to selling its software, the Company provides post-contract support, training and consulting services for its offerings. The Company’s fiscal year ends January 31.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated balance sheet as of July 31, 2019, the interim condensed consolidated statements of stockholders’ equity for the three and six months ended July 31, 2019 and 2018, the interim condensed consolidated statements of operations and of comprehensive loss for the three and six months ended July 31, 2019 and 2018 and the interim condensed consolidated statements of cash flows for the six months ended July 31, 2019 and 2018 are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of July 31, 2019, its statements of stockholders’ equity as of July 31, 2019 and 2018, its results of operations and of comprehensive loss for the three and six months ended July 31, 2019 and 2018 and its statements of cash flows for the six months ended July 31, 2019 and 2018. The financial data and the other financial information disclosed in the notes to these interim condensed consolidated financial statements related to the three and six-month periods are also unaudited. The results of operations for the three and six months ended July 31, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2020 or for any other future year or interim period.
The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed balance sheet data as of January 31, 2019 was derived from the Company’s audited financial statements, but does not include all disclosures required by U.S. GAAP. Therefore, these interim unaudited condensed consolidated financial statements and accompanying footnotes should be read in conjunction with the Company’s annual consolidated financial statements and related footnotes included in its Annual Report on Form 10-K for the fiscal year ended January 31, 2019 (the “2019 Form 10-K”).
Effective February 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). All amounts and disclosures in this Quarterly Report on Form 10-Q have been updated to comply with the new revenue standard.
Use of Estimates
The preparation of the interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, revenue recognition, allowances for doubtful accounts, stock-based compensation, legal contingencies, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, fair value of property and equipment and accounting for income taxes. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.

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Table of Contents
MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies as described in the Company’s 2019 Form 10-K other than the adoption of the new accounting guidance related to leases and stock-based compensation, effective February 1, 2019, as discussed in “Recently Adopted Accounting Pronouncements” below. Further disclosures with respect to the Company’s leases are also included in Note 7, Leases.
Related Party Transactions
All contracts with related parties are executed in ordinary course of business. There were no material related party transactions in the three and six months ended July 31, 2019 and 2018. As of July 31, 2019 and January 31, 2019, there were no material amounts payable to or amounts receivable from related parties.
Recently Adopted Accounting Pronouncements
Leases. In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, codified as Accounting Standards Codification 842 (“ASC 842”), which requires lessees to record the assets and liabilities arising from all leases, with the exception of short-term leases, on the balance sheet. Under ASC 842, lessees will recognize a liability for lease payments and a right-of-use asset. This guidance retains the distinction between finance leases and operating leases and the classification criteria for finance leases remains similar. For finance leases, a lessee will recognize the interest on a lease liability separate from amortization of the right-of-use asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows.
The Company adopted the new lease accounting standard effective February 1, 2019 using the additional transition method described in ASU No. 2018-11, Leases – Targeted Improvements, which was issued in July 2018. Under the additional transition method, the Company recognized the cumulative effect of initially applying the guidance as an adjustment to the operating lease right-of-use assets and operating lease liabilities on its condensed consolidated balance sheet on February 1, 2019 without retrospective application to comparative periods. The adoption of ASC 842 resulted in recognition of right-of-use assets of $53.7 million, which included the impact of existing deferred rents of $2.9 million and lease liabilities of $70.2 million, along with a cumulative impact of $4.1 million on the opening accumulated deficit, as of February 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which allowed the Company to carry forward its historical assessments of whether contracts are or contain leases, lease classification and initial direct costs. See Note 7, Leases, for additional details.
The Company determines if an arrangement is, or contains, a lease at inception. Operating leases are disclosed separately on the condensed consolidated balance sheets and the finance lease is included in property and equipment, net, other accrued liabilities and other liabilities, non-current. The Company has elected an accounting policy to not recognize short-term leases (one year or less) on the consolidated balance sheet. Operating lease right of use assets and operating lease liabilities are recognized based on the present value of the lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used based on the information available at commencement date in determining the present value of future payments. The operating lease right of use asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component.
Stock-Based Compensation. In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees, with certain exceptions. The new guidance was effective for the Company for fiscal year beginning February 1, 2019 and the adoption had no material impact on its condensed consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
Goodwill Impairment. In January 2017, the FASB issued ASU No. 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new standard simplifies the measurement of goodwill by eliminating step two of the two-step impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value

8

Table of Contents
MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for the Company for the fiscal year beginning February 1, 2020, though early adoption is permitted. The Company does not expect the adoption of the new accounting standard to have a material impact on its condensed consolidated financial statements.
Cloud Computing. In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. ASU No. 2018-15 becomes effective for the Company for the fiscal year beginning February 1, 2020, with early adoption permitted, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.
Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, which includes the Company's accounts receivables, certain financial instruments and contract assets. ASU No. 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. For available-for-sale debt securities, credit losses should be recorded through an allowance for credit losses. ASU No. 2016-13 becomes effective for the Company for the fiscal year beginning February 1, 2020 and requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.
3.
Fair Value Measurements
The following tables present information about the Company’s financial assets that have been measured at fair value on a recurring basis as of July 31, 2019 and January 31, 2019, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
 
Fair Value Measurement at July 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
121,230

 
$

 
$

 
$
121,230

Short-term investments:
 
 
 
 
 
 
 
U.S. government treasury securities
249,369

 

 

 
249,369

Total financial assets
$
370,599

 
$

 
$

 
$
370,599

 
Fair Value Measurement at January 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
88,015

 
$

 
$

 
$
88,015

Short-term investments:
 
 
 
 
 
 
 
U.S. government treasury securities
318,139

 

 

 
318,139

Total financial assets
$
406,154

 
$

 
$

 
$
406,154


The Company utilized the market approach and Level 1 valuation inputs to value its money market mutual funds and U.S. government treasury securities because published net asset values were readily available. As of July 31, 2019 and

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Table of Contents
MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


January 31, 2019, gross unrealized gains and unrealized losses for cash equivalents and short-term investments were not material, and the contractual maturity of all marketable securities was less than one year.
In addition to its cash, cash equivalents and short-term investments, the Company measures the fair value of its outstanding Notes (as defined below) on a quarterly basis for disclosure purposes. The Company considers the fair value of the Notes at July 31, 2019 to be a Level 2 measurement due to limited trading activity of the Notes. Refer to Note 6, Convertible Senior Notes, to the condensed consolidated financial statements for further details.
4.
Business Combinations
The Company acquired all of the issued and outstanding capital stock of Tightdb, Inc. (“Realm”) on May 7, 2019 (the “Acquisition Date”) for a purchase price of $39.0 million in cash, subject to working capital, cash, debt, transaction expenses and other closing adjustments. Realm, based in San Francisco, California, offers a mobile database, as well as a platform with real-time data synchronization between mobile applications and cloud databases.
The Company used the acquisition method to account for the purchase of Realm, which met the definition of a business. During the three months ended July 31, 2019, the Company finalized the working capital, cash, debt, transaction expenses and other closing adjustments and identified and recorded the fair value of the assets and liabilities acquired, as well as the residual value to goodwill. The allocation of the purchase price was based on available information and assumptions at the time of the initial valuation and may be subject to change within the measurement period.
The total merger consideration, after closing adjustments, was $38.8 million, which included adjustments for cash and working capital. The following table represents a summary of the purchase price (in thousands):
 
Amounts
Purchase price pursuant to the merger agreement
$
39,000

Estimated cash amount
115

Downward closing working capital adjustment
(352
)
Total purchase price to be allocated
$
38,763


The following table summarizes the purchase price allocation fair values of the assets acquired and liabilities and the value of goodwill assumed at the Acquisition Date (in thousands):
 
Estimated Fair Value
Financial and tangible assets, net
$
43

Identifiable intangible asset - developed technology
27,300

Identifiable intangible asset - customer relationships
1,700

Deferred revenue
(350
)
Goodwill
10,070

Total purchase price
$
38,763


Financial and tangible assets, net primarily include the cash acquired and accounts receivable, net of existing Realm obligations as of the Acquisition Date.
Developed technology includes both the Realm mobile database and the Realm Object Server, which together automatically synchronizes data between mobile applications and cloud databases, including MongoDB Atlas. The Company determined the economic useful life to be five years based on expected time period that the asset would contribute to the Company’s future cash flows without significant upgrades. The fair value of developed technology was estimated using the reproduction cost method (Level 3), which utilized assumptions for the cost to replace, such as the workforce, timing and resources required, as well as a theoretical profit margin and opportunity cost.
Customer relationships represent the fair value of projected subscription revenue that is expected to be generated from existing customers as of the Acquisition Date. The Company determined the economic useful life to be five years and the fair value of customer relationships was estimated using the replacement cost approach (Level 3), which utilized assumptions for

10

Table of Contents
MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


sales and marketing expenses to determine the estimated cost to acquire a Realm customer. Other assumptions include a theoretical profit margin and opportunity costs.
These two intangible assets acquired are being amortized over their estimated useful lives using the straight-line method of amortization, which approximates the distribution of the economic value of the identified intangible assets. See Note 5, Goodwill and Acquired Intangible Assets, Net, for further details
Deferred revenue was estimated at fair value under the cost build-up method (Level 3), which was determined based on estimated direct and indirect costs to support and fulfill the subscription obligation plus an assumed operating margin. Deferred revenue will be recognized based on the revenue criteria set forth in Note 2, Summary of Significant Accounting Policies, in the Company’s 2019 Form 10-K.
Goodwill related to the acquisition, which represents the difference between the purchase price and fair values of identifiable net assets, is primarily attributable to assembled workforce, as well as expected synergies of the combination. The goodwill is not tax deductible for U.S. income tax purposes. In addition to the goodwill recorded through the purchase price allocation disclosed in the table above, the Company recorded an additional $3.5 million to goodwill resulting from deferred tax liabilities associated with the acquired intangible assets. Refer to Note 12, Income Taxes, for further discussion of the tax impact of the acquisition.
The Company incurred acquisition-related costs for the Realm acquisition of $0.6 million during the six months ended July 31, 2019. These acquisition-related costs were included in general and administrative expenses in the Company’s condensed consolidated statements of operations.
The Company included Realm’s estimated fair value of assets acquired and liabilities assumed in its condensed consolidated balance sheet beginning on the Acquisition Date. The results of operations for Realm subsequent to the Acquisition Date have been included in, but are not material to, the Company's condensed consolidated statements of operations for the three and six months ended July 31, 2019. The pro forma results of operations for the Realm acquisition have not been presented because they were not material to the Company’s condensed consolidated statements of operations for the three and six months ended July 31, 2019 and 2018.
5.
Goodwill and Acquired Intangible Assets, Net
The following table summarizes the changes in the carrying amount of goodwill during the periods presented (in thousands):
Balance, January 31, 2019
$
41,878

Increase in goodwill related to business combinations
13,606

Balance, July 31, 2019
$
55,484


Refer to Note 4, Business Combinations, for further details on the addition to goodwill.

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MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


The gross carrying amount and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
 
July 31, 2019
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
Developed technology
$
34,700

 
$
(7,703
)
 
$
26,997

Domain name
155

 
(140
)
 
15

Customer relationships
15,200

 
(2,110
)
 
13,090

Total
$
50,055

 
$
(9,953
)
 
$
40,102

 
January 31, 2019
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
Developed technology
$
7,400

 
$
(4,358
)
 
$
3,042

Domain name
155

 
(128
)
 
27

Customer relationships
13,500

 
(675
)
 
12,825

Total
$
21,055

 
$
(5,161
)
 
$
15,894

Acquired intangible assets are amortized on a straight-line basis. As of July 31, 2019, the weighted-average remaining useful lives of identifiable, acquisition-related intangible assets was 4.6 years for developed technology, 0.7 years for domain name and 4.3 years for customer relationships. Amortization expense of intangible assets was $3.1 million and $4.8 million for the three and six months ended July 31, 2019, respectively. Amortization expense for developed technology and the domain name was included as research and development expense in the Company’s condensed consolidated statements of operations. Amortization expense for customer relationships was included as sales and marketing expense in the Company’s condensed consolidated statements of operations.
As of July 31, 2019, future amortization expense related to the intangible assets is as follows (in thousands):
Years Ending January 31,
 
Remainder of 2020
$
5,323

2021
8,504

2022
8,500

2023
8,500

2024
7,825

2025
1,450

Total
$
40,102


6.
Convertible Senior Notes
 In June 2018, the Company issued $250.0 million aggregate principal amount of 0.75% convertible senior notes due 2024 (the “Notes”) in a private placement and, in July 2018, the Company issued an additional $50.0 million aggregate principal amount of the Notes pursuant to the exercise in full of the initial purchasers’ option to purchase additional Notes. The Notes are senior unsecured obligations of the Company, and interest is payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2018, at a rate of 0.75% per year.  The Notes will mature on June 15, 2024, unless earlier converted, redeemed or repurchased. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, were approximately $291.1 million.
The initial conversion rate is 14.6738 shares of the Company’s Class A common stock per $1,000 principal amount of Notes, which is equal to an initial conversion price of approximately $68.15 per share of Class A common stock, subject to adjustment upon the occurrence of specified events. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2024, only under the following circumstances:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(1)
during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2018 (and only during such fiscal quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day;
(2)
during the five-business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate of the Notes on each such trading day;
(3)
if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4)
upon the occurrence of specified corporate events (as set forth in the indenture governing the Notes).
On or after March 15, 2024, until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder, regardless of the foregoing circumstances. Upon conversion, the Company will satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s Class A common stock or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election. If a fundamental change (as defined in the indenture governing the Notes) occurs prior to the maturity date, holders of the Notes will have the right to require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if specific corporate events occur prior to the applicable maturity date, or if the Company elects to redeem the Notes, the Company will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event or redemption in certain circumstances. It is the Company’s current intent to settle the principal amount of the Notes in cash.
During the three months ended July 31, 2019, the conditional conversion feature of the Notes was triggered as the last reported sale price of the Company's Class A common stock was more than or equal to 130% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on July 31, 2019 (the last trading day of the fiscal quarter), and therefore the Notes are currently convertible, in whole or in part, at the option of the holders between August 1, 2019 through October 31, 2019. Whether the Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future. As of July 31, 2019, the Company had not received any conversion notices. Since the Company has the election of repaying the Notes in cash, shares of the Company’s Class A common stock, or a combination of both, the Company continued to classify the Notes as long-term debt on the Company’s condensed consolidated balance sheet as of July 31, 2019.
The Company may not redeem the Notes prior to June 20, 2021. On or after June 20, 2021, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of its Class A common stock was at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
In accounting for the issuance of the Notes, the Notes were separated into liability and equity components. The carrying amounts of the liability component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the respective Notes. This difference represents the debt discount that is amortized to interest expense over the respective terms of the Notes using the effective interest rate method. The carrying amount of the equity component representing the conversion option was $84.2 million. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the debt issuance costs of $8.8 million related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $6.3 million and will be amortized, along with the debt discount, to interest expense over the contractual term of the Notes at an effective interest rate of 7.03%. Issuance costs attributable to the equity component

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


were $2.5 million and are netted against the equity component representing the conversion option in additional paid-in capital.
The net carrying amount of the liability component of the Notes was as follows (in thousands):
 
July 31, 2019
Principal
$
300,000

Unamortized debt discount
(71,096
)
Unamortized debt issuance costs
(5,548
)
Net carrying amount
$
223,356

The net carrying amount of the equity component of the Notes was as follows (in thousands):
 
July 31, 2019
Debt discount for conversion option
$
84,168

Issuance costs
(2,485
)
Net carrying amount
$
81,683


As of July 31, 2019, the total estimated fair value of the Notes was approximately $654.3 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market interest rates.
The following table sets forth the interest expense related to the Notes (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Contractual interest expense
$
563

 
$
200

 
$
1,126

 
$
200

Amortization of debt discount
3,082

 
1,034

 
6,115

 
1,034

Amortization of issuance costs
195

 
60

 
383

 
60

Total
$
3,840

 
$
1,294

 
$
7,624

 
$
1,294


Capped Calls
In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “Capped Calls”). The Capped Calls each have an initial strike price of approximately $68.15 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $106.90 per share, subject to certain adjustments. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the Notes, with such offset subject to a cap based on the cap price. The Capped Calls cover, subject to anti-dilution adjustments, approximately 4.4 million shares of the Company’s Class A common stock. The Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers and the announcement of such events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $37.1 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital and will not be remeasured.

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MONGODB, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


7. Leases
Finance Lease
In December 2017, the Company entered into a lease agreement for 106,230 rentable square feet of office space (the “Premises”) to accommodate its growing employee base in New York City. The Company received delivery of the Premises on January 1, 2018 to commence construction to renovate the Premises. Total estimated aggregate base rent payments over the initial 12-year term of the lease are $87.3 million and payments began in July 2019. The Company has the option to extend the term of the lease by an additional 5 years.
Operating Leases
The Company has entered into non-cancelable operating leases, primarily related to rental of office space expiring through 2029. The Company recognizes operating lease costs on a straight-line basis over the term of the agreement, taking into account adjustments for market provisions such as free or escalating base monthly rental payments or deferred payment terms such as rent holidays that defer the commencement date of the required payments. The Company may receive renewal or expansion options, leasehold improvement allowances or other incentives on certain lease agreements.
Lease Costs
The components of the Company’s lease costs included in its condensed consolidated statement of operations were as follows (in thousands):
 
Three Months Ended July 31, 2019
 
Six Months Ended July 31, 2019
Finance lease cost:
 
 
 
Amortization of right-of-use assets
$
994

 
$
1,988

Interest on lease liabilities
918

 
1,823

Operating lease cost
1,386

 
2,353

Short-term lease cost
308

 
703

Total lease cost
$
3,606

 
$
6,867


Balance Sheet Components
The balances of the Company’s operating and finance leases were recorded on the condensed consolidated balance sheet as follows (in thousands):
 
July 31, 2019
Operating Leases:
 
Operating lease right-of-use assets
$
11,698

Operating lease liabilities (current)
3,729

Operating lease liabilities, non-current