MongoDB, Inc. (MDB)

FORM 10-Q | Quarterly Report
Sep. 5, 2019 5:22 PM
|
About: MongoDB, Inc. (MDB)View as PDF
MongoDB, Inc. (Form: 10-Q, Received: 09/05/2019 17:23:52)
false--01-31Q220200001441816153900014790001.00000.0010.0010.0010.00110000000001000000001000000000100000000362865731813460846885379945260836286573180352374688537993532370.100.603030000045100000000000.750.7513.2713.2799371993713500000 0001441816 2019-02-01 2019-07-31 0001441816 us-gaap:CommonClassAMember 2019-09-03 0001441816 us-gaap:CommonClassBMember 2019-09-03 0001441816 2019-07-31 0001441816 2019-01-31 0001441816 us-gaap:CommonClassBMember 2019-01-31 0001441816 us-gaap:CommonClassAMember 2019-01-31 0001441816 us-gaap:CommonClassAMember 2019-07-31 0001441816 us-gaap:CommonClassBMember 2019-07-31 0001441816 2018-02-01 2019-01-31 0001441816 2019-05-01 2019-07-31 0001441816 2018-05-01 2018-07-31 0001441816 us-gaap:ServiceMember 2018-02-01 2018-07-31 0001441816 us-gaap:ServiceMember 2018-05-01 2018-07-31 0001441816 us-gaap:LicenseMember 2018-02-01 2018-07-31 0001441816 2018-02-01 2018-07-31 0001441816 us-gaap:LicenseMember 2018-05-01 2018-07-31 0001441816 us-gaap:LicenseMember 2019-05-01 2019-07-31 0001441816 us-gaap:LicenseMember 2019-02-01 2019-07-31 0001441816 us-gaap:ServiceMember 2019-02-01 2019-07-31 0001441816 us-gaap:ServiceMember 2019-05-01 2019-07-31 0001441816 us-gaap:TreasuryStockMember 2019-01-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-05-01 2019-07-31 0001441816 2019-02-01 2019-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2019-05-01 2019-07-31 0001441816 us-gaap:CommonStockMember 2019-02-01 2019-04-30 0001441816 2019-02-01 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2019-01-31 0001441816 us-gaap:RetainedEarningsMember 2019-02-01 2019-04-30 0001441816 us-gaap:RetainedEarningsMember 2019-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2019-02-01 2019-04-30 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-31 0001441816 us-gaap:CommonStockMember 2019-04-30 0001441816 us-gaap:CommonStockMember 2019-01-31 0001441816 us-gaap:RetainedEarningsMember 2019-05-01 2019-07-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-02-01 2019-04-30 0001441816 us-gaap:RetainedEarningsMember 2019-02-01 0001441816 us-gaap:RetainedEarningsMember 2019-07-31 0001441816 us-gaap:TreasuryStockMember 2019-07-31 0001441816 us-gaap:CommonStockMember 2019-07-31 0001441816 us-gaap:AdditionalPaidInCapitalMember 2019-07-31 0001441816 us-gaap:RetainedEarningsMember 2019-01-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-31 0001441816 us-gaap:CommonStockMember 2019-05-01 2019-07-31 0001441816 2019-04-30 0001441816 us-gaap:TreasuryStockMember 2019-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2019-04-30 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-30 0001441816 us-gaap:CommonStockMember 2018-01-31 0001441816 us-gaap:TreasuryStockMember 2018-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2018-05-01 2018-07-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-05-01 2018-07-31 0001441816 us-gaap:CommonStockMember 2018-05-01 2018-07-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-02-01 2018-04-30 0001441816 us-gaap:RetainedEarningsMember 2018-01-31 0001441816 2018-02-01 2018-04-30 0001441816 2018-07-31 0001441816 us-gaap:AdditionalPaidInCapitalMember 2018-02-01 2018-04-30 0001441816 us-gaap:RetainedEarningsMember 2018-02-01 2018-04-30 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-31 0001441816 us-gaap:RetainedEarningsMember 2018-05-01 2018-07-31 0001441816 us-gaap:CommonStockMember 2018-02-01 2018-04-30 0001441816 us-gaap:TreasuryStockMember 2018-01-31 0001441816 us-gaap:AdditionalPaidInCapitalMember 2018-07-31 0001441816 us-gaap:CommonStockMember 2018-07-31 0001441816 us-gaap:TreasuryStockMember 2018-07-31 0001441816 us-gaap:AdditionalPaidInCapitalMember 2018-01-31 0001441816 us-gaap:CommonStockMember 2018-04-30 0001441816 us-gaap:RetainedEarningsMember 2018-07-31 0001441816 2018-04-30 0001441816 2018-01-31 0001441816 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-31 0001441816 us-gaap:RetainedEarningsMember 2018-04-30 0001441816 us-gaap:AdditionalPaidInCapitalMember 2018-04-30 0001441816 us-gaap:AccountingStandardsUpdate201619Member us-gaap:RetainedEarningsMember 2019-02-01 0001441816 us-gaap:AccountingStandardsUpdate201619Member 2019-02-01 0001441816 us-gaap:MoneyMarketFundsMember 2019-01-31 0001441816 us-gaap:USTreasurySecuritiesMember 2019-01-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2019-01-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member 2019-01-31 0001441816 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2019-01-31 0001441816 us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2019-01-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member 2019-01-31 0001441816 us-gaap:FairValueInputsLevel1Member 2019-01-31 0001441816 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2019-01-31 0001441816 us-gaap:FairValueInputsLevel3Member 2019-01-31 0001441816 us-gaap:FairValueInputsLevel2Member 2019-01-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member 2019-07-31 0001441816 us-gaap:FairValueInputsLevel3Member 2019-07-31 0001441816 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2019-07-31 0001441816 us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2019-07-31 0001441816 us-gaap:FairValueInputsLevel1Member 2019-07-31 0001441816 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2019-07-31 0001441816 us-gaap:MoneyMarketFundsMember 2019-07-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2019-07-31 0001441816 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member 2019-07-31 0001441816 us-gaap:FairValueInputsLevel2Member 2019-07-31 0001441816 us-gaap:USTreasurySecuritiesMember 2019-07-31 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember 2019-05-07 2019-05-07 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember 2019-05-07 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember us-gaap:TechnologyBasedIntangibleAssetsMember 2019-05-07 2019-05-07 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember us-gaap:CustomerRelationshipsMember 2019-05-07 2019-05-07 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember 2019-07-31 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember 2019-02-01 2019-07-31 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember us-gaap:CustomerRelationshipsMember 2019-05-07 0001441816 mdb:KingdomMergerSubIncAndTightdbInc.MergerMember us-gaap:TechnologyBasedIntangibleAssetsMember 2019-05-07 0001441816 us-gaap:DevelopedTechnologyRightsMember 2019-02-01 2019-07-31 0001441816 us-gaap:CustomerRelationshipsMember 2019-02-01 2019-07-31 0001441816 us-gaap:InternetDomainNamesMember 2019-02-01 2019-07-31 0001441816 us-gaap:DevelopedTechnologyRightsMember 2019-01-31 0001441816 us-gaap:CustomerRelationshipsMember 2019-01-31 0001441816 us-gaap:InternetDomainNamesMember 2019-01-31 0001441816 us-gaap:DevelopedTechnologyRightsMember 2019-07-31 0001441816 us-gaap:CustomerRelationshipsMember 2019-07-31 0001441816 us-gaap:InternetDomainNamesMember 2019-07-31 0001441816 us-gaap:ConvertibleDebtMember 2018-07-31 0001441816 srt:MaximumMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2018-07-31 0001441816 2018-06-01 2018-07-31 0001441816 us-gaap:DebtInstrumentRedemptionPeriodOneMember 2018-06-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtMember 2018-06-30 0001441816 us-gaap:CallOptionMember 2018-06-01 2018-07-31 0001441816 mdb:ConvertibleSeniorNotesLiabilityComponentMember us-gaap:ConvertibleDebtMember 2018-07-31 0001441816 srt:MinimumMember us-gaap:DebtInstrumentRedemptionPeriodOneMember 2018-06-01 2018-07-31 0001441816 us-gaap:CallOptionMember us-gaap:CommonClassAMember 2018-06-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtMember 2019-07-31 0001441816 us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2018-06-01 2018-07-31 0001441816 srt:MinimumMember 2019-02-01 2019-07-31 0001441816 us-gaap:ConvertibleDebtMember 2018-06-01 2018-07-31 0001441816 us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2018-07-31 0001441816 mdb:ConvertibleSeniorNotesEquityComponentMember us-gaap:ConvertibleDebtMember 2018-07-31 0001441816 srt:MinimumMember 2018-06-01 2018-07-31 0001441816 mdb:ConvertibleSeniorNotesLiabilityComponentMember us-gaap:ConvertibleDebtMember 2019-07-31 0001441816 mdb:ConvertibleSeniorNotesEquityComponentMember us-gaap:ConvertibleDebtMember 2019-07-31 0001441816 us-gaap:ConvertibleDebtMember 2019-05-01 2019-07-31 0001441816 us-gaap:ConvertibleDebtMember 2018-02-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtMember 2019-02-01 2019-07-31 0001441816 us-gaap:ConvertibleDebtMember 2018-05-01 2018-07-31 0001441816 country:GB us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-05-01 2018-07-31 0001441816 country:US us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-05-01 2018-07-31 0001441816 country:GB us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-02-01 2018-07-31 0001441816 country:GB us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-01 2019-07-31 0001441816 2019-08-01 2019-07-31 0001441816 country:US us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-02-01 2019-07-31 0001441816 country:US us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-02-01 2018-07-31 0001441816 us-gaap:EMEAMember 2018-02-01 2018-07-31 0001441816 srt:AmericasMember 2018-02-01 2018-07-31 0001441816 mdb:OtherSubscriptionMember 2018-02-01 2018-07-31 0001441816 mdb:OtherSubscriptionMember 2019-02-01 2019-07-31 0001441816 mdb:MongoDBAtlasRelatedMember 2018-02-01 2018-07-31 0001441816 mdb:OtherSubscriptionMember 2018-05-01 2018-07-31 0001441816 mdb:OtherSubscriptionMember 2019-05-01 2019-07-31 0001441816 srt:AsiaPacificMember 2018-05-01 2018-07-31 0001441816 us-gaap:EMEAMember 2019-05-01 2019-07-31 0001441816 us-gaap:EMEAMember 2018-05-01 2018-07-31 0001441816 srt:AsiaPacificMember 2018-02-01 2018-07-31 0001441816 srt:AmericasMember 2019-05-01 2019-07-31 0001441816 srt:AsiaPacificMember 2019-05-01 2019-07-31 0001441816 srt:AmericasMember 2019-02-01 2019-07-31 0001441816 srt:AmericasMember 2018-05-01 2018-07-31 0001441816 mdb:MongoDBAtlasRelatedMember 2019-05-01 2019-07-31 0001441816 mdb:MongoDBAtlasRelatedMember 2018-05-01 2018-07-31 0001441816 srt:AsiaPacificMember 2019-02-01 2019-07-31 0001441816 mdb:MongoDBAtlasRelatedMember 2019-02-01 2019-07-31 0001441816 us-gaap:EMEAMember 2019-02-01 2019-07-31 0001441816 country:US us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-05-01 2019-07-31 0001441816 country:GB us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-05-01 2019-07-31 0001441816 mdb:CostofRevenueSubscriptionMember 2018-05-01 2018-07-31 0001441816 mdb:CostofRevenueServicesMember 2018-05-01 2018-07-31 0001441816 us-gaap:GeneralAndAdministrativeExpenseMember 2018-02-01 2018-07-31 0001441816 us-gaap:ResearchAndDevelopmentExpenseMember 2019-05-01 2019-07-31 0001441816 us-gaap:SellingAndMarketingExpenseMember 2018-02-01 2018-07-31 0001441816 us-gaap:SellingAndMarketingExpenseMember 2019-05-01 2019-07-31 0001441816 mdb:CostofRevenueServicesMember 2019-02-01 2019-07-31 0001441816 mdb:CostofRevenueSubscriptionMember 2019-02-01 2019-07-31 0001441816 mdb:CostofRevenueSubscriptionMember 2019-05-01 2019-07-31 0001441816 us-gaap:ResearchAndDevelopmentExpenseMember 2018-02-01 2018-07-31 0001441816 mdb:CostofRevenueServicesMember 2018-02-01 2018-07-31 0001441816 us-gaap:GeneralAndAdministrativeExpenseMember 2018-05-01 2018-07-31 0001441816 mdb:CostofRevenueSubscriptionMember 2018-02-01 2018-07-31 0001441816 us-gaap:SellingAndMarketingExpenseMember 2018-05-01 2018-07-31 0001441816 us-gaap:ResearchAndDevelopmentExpenseMember 2019-02-01 2019-07-31 0001441816 mdb:CostofRevenueServicesMember 2019-05-01 2019-07-31 0001441816 us-gaap:SellingAndMarketingExpenseMember 2019-02-01 2019-07-31 0001441816 us-gaap:ResearchAndDevelopmentExpenseMember 2018-05-01 2018-07-31 0001441816 us-gaap:GeneralAndAdministrativeExpenseMember 2019-02-01 2019-07-31 0001441816 us-gaap:GeneralAndAdministrativeExpenseMember 2019-05-01 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2019-02-01 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2019-01-31 0001441816 us-gaap:EmployeeStockMember 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-02-01 2019-07-31 0001441816 us-gaap:EmployeeStockMember 2019-05-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember 2019-02-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-02-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-02-01 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-02-01 2019-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2019-02-01 2019-07-31 0001441816 mdb:EarlyExercisedEmployeeStockOptionMember 2019-02-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassAMember 2019-02-01 2019-07-31 0001441816 mdb:EarlyExercisedEmployeeStockOptionMember 2018-05-01 2018-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2018-05-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtSecuritiesMember 2018-02-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtSecuritiesMember 2018-05-01 2018-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassAMember 2018-05-01 2018-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassBMember 2019-05-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassBMember 2018-05-01 2018-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2018-02-01 2018-07-31 0001441816 us-gaap:RestrictedStockUnitsRSUMember 2019-05-01 2019-07-31 0001441816 us-gaap:ConvertibleDebtSecuritiesMember 2019-05-01 2019-07-31 0001441816 mdb:EarlyExercisedEmployeeStockOptionMember 2018-02-01 2018-07-31 0001441816 mdb:EarlyExercisedEmployeeStockOptionMember 2019-05-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassBMember 2019-02-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassAMember 2019-05-01 2019-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassBMember 2018-02-01 2018-07-31 0001441816 us-gaap:EmployeeStockOptionMember us-gaap:CommonClassAMember 2018-02-01 2018-07-31 0001441816 us-gaap:ConvertibleDebtSecuritiesMember 2019-02-01 2019-07-31 0001441816 us-gaap:CommonClassAMember 2019-02-01 2019-07-31 0001441816 us-gaap:CommonClassBMember 2019-02-01 2019-07-31 utreg:sqft iso4217:USD xbrli:shares mdb:asset iso4217:USD xbrli:shares xbrli:pure mdb:day

 
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
1
 
1
 
2
 
3
 
4
 
6
 
7
23
36
37
 
 
 
38
38
64
65
65
65
66
67





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


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.

2


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


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.




4


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.


5


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.

6

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.

7

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

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

9

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

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.

11

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:

12

MONGODB, INC.
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

13

MONGODB, INC.
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.

14

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
9,002

Finance Lease:
 
Property and equipment, net
$
41,399

Other accrued liabilities
4,200

Other liabilities, non-current
61,605



15

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


Supplemental Information
The following table presents supplemental information related to the Company’s operating and finance leases (in thousands, except weighted-average information):
 
Six Months Ended July 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from finance lease
$

Operating cash flows from operating leases
2,083

Financing cash flows from finance lease

Right-of-use assets obtained in exchange for lease obligations:
 
Finance lease
$

Operating leases
2,567

Weighted-average remaining lease term (in years):
 
Finance lease
10.4

Operating leases
4.7

Weighted-average discount rate:
 
Finance lease
5.6
%
Operating leases
6.1
%

Maturities of Lease Liabilities
Future minimum lease payments under non-cancelable finance and operating leases on an annual undiscounted cash flow basis as of July 31, 2019 were as follows (in thousands):
Year Ending January 31,
Finance Lease
 
Operating Leases
Remainder of 2020
$
3,732

 
$
3,248

2021
8,073

 
4,926

2022
8,073

 
2,869

2023
8,073

 
2,781

2024
8,073

 
1,300

Thereafter
51,274

 
2,264

Total minimum payments
87,298

 
17,388

Less imputed interest
(21,493
)
 
(4,657
)
Present value of future minimum lease payments
65,805

 
12,731

Less current obligations under leases
(4,200
)
 
(3,729
)
Non-current lease obligations
$
61,605

 
$
9,002



16

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


Future minimum lease payments under non-cancelable financing and operating leases, based on the previous lease accounting standard, as of January 31, 2019, were as follows (in thousands):
Year Ending January 31,
Financing Lease
 
Operating Leases
2020
$
3,732

 
$
4,578

2021
8,073

 
3,765

2022
8,073

 
2,277

2023
8,073

 
2,224

2024
8,073

 
922

Thereafter
51,274

 
2,149

Total minimum payments
$
87,298

 
$
15,915


8.
Commitments and Contingencies
Non-cancelable Material Commitments
During the six months ended July 31, 2019, there have been no material changes outside the ordinary course of business to the Company’s contractual obligations and commitments from those disclosed in the 2019 Form 10-K.
Legal Matters
From time to time, the Company has become involved in claims and other legal matters arising in the ordinary course of business. For example, on March 12, 2019, Realtime Data (“Realtime”) filed a lawsuit against the Company in the United States District Court for the District of Delaware alleging that the Company is infringing three U.S. patents that it holds: U.S. Patent No. 9,116,908, U.S. Patent No. 9,667,751 and U.S. Patent No. 8,933,825. The patent infringement allegations in the lawsuit relate to data compression, decompression, storage and retrieval. Realtime seeks monetary damages and injunctive relief. In August 2019, the District Court approved the Company and Realtime’s stipulation to stay Realtime’s lawsuit against the Company pending the outcome of Realtime's appeal of the District Court's decision to invalidate two of the asserted patents in a separate action.  
The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, financial position, results of operations or cash flows.
The Company accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, the Company is a party to litigation and subject to claims and threatened claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, breach of contract claims, and other matters.
Although the results of litigation and claims are inherently unpredictable, the Company believes that there was not at least a reasonable possibility that the Company had incurred a material loss with respect to such loss contingencies, as of July 31, 2019 and January 31, 2019, therefore, the Company has not recorded an accrual for such contingencies.
Indemnification
The Company enters into indemnification provisions under its agreements with other companies in the ordinary course of business, including business partners, landlords, contractors and parties performing its research and development. Pursuant to these arrangements, the Company agrees to indemnify, hold harmless and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party as a result of the Company’s activities. The terms of these indemnification agreements are generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is not material. The Company maintains commercial general liability insurance and product liability insurance to offset certain of the Company’s potential liabilities under these indemnification provisions.

17

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


The Company has entered into indemnification agreements with each of its directors and executive officers. These agreements require the Company to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with the Company.
9.
Revenue
Disaggregation of Revenue
Based on the information provided to and reviewed by the Company’s Chief Executive Officer, the Company believes that the nature, amount, timing and uncertainty of its revenue and cash flows and how they are affected by economic factors is most appropriately depicted through the Company’s primary geographical markets and subscription product categories. The Company’s primary geographical markets are North and South America (“Americas”); Europe, Middle East and Africa (“EMEA”); and Asia Pacific. The Company also disaggregates its subscription products between its MongoDB Atlas-related offerings, which includes mLab, and other subscription products, which includes MongoDB Enterprise Advanced.
The following table presents the Company’s revenues disaggregated by primary geographical markets, subscription product categories and services (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Primary geographical markets:
 
 
 
 
 
 
 
Americas
$
64,967

 
$
38,736

 
$
122,730

 
$
72,156

EMEA
27,810

 
17,937

 
53,231

 
31,961

Asia Pacific
6,591

 
2,938

 
12,795

 
5,633

Total
$
99,368

 
$
59,611

 
$
188,756

 
$
109,750

 
 
 
 
 
 
 
 
Subscription product categories and services:
 
 
 
 
 
 
 
MongoDB Atlas-related
$
36,787

 
$
10,607

 
$
67,650

 
$
17,570

Other subscription
57,369

 
44,479

 
110,500

 
83,585

Services
5,212

 
4,525

 
10,606

 
8,595

Total
$
99,368

 
$
59,611

 
$
188,756

 
$
109,750


Customers located in the United States accounted for 60% of total revenue for both the three and six months ended July 31, 2019 and 60% and 61% of total revenue for the three and six months ended July 31, 2018, respectively. Customers located in the United Kingdom accounted for 10% of total revenue for both the three and six months ended July 31, 2019 and 12% and 11% for the three and six months ended July 31, 2018, respectively. No other country accounted for 10% or more of revenue for the periods presented.
As of July 31, 2019 and 2018, substantially all of the Company’s long-lived assets were located in the United States.
Contract Liabilities
The Company’s contract liabilities are recorded as deferred revenue in the Company’s consolidated balance sheet and consists of customer invoices issued or payments received in advance of revenues being recognized from the Company’s subscription and services contracts. Deferred revenue, including current and non-current balances, as of July 31, 2019 and January 31, 2019 was $150.2 million and $137.7 million, respectively. For the six months ended July 31, 2019 and 2018, revenue recognized from deferred revenue at the beginning of each period was $83.9 million and $55.6 million, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. As of July 31, 2019, the aggregate transaction price allocated to remaining performance obligations was $175.7 million. Approximately 55% is expected to be recognized as revenue over the next 12 months and the remainder thereafter. The Company applied the practical expedient to omit

18

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


disclosure with respect to the amount of the transaction price allocated to remaining performance obligations if the related contract has a total duration of 12 months or less.
Unbilled Receivables
Revenue recognized in excess of invoiced amounts creates an unbilled receivable, which represents the Company’s unconditional right to consideration in exchange for goods or services that the Company has transferred to the customer. Unbilled receivables were recorded as part of accounts receivable, net in the Company’s consolidated balance sheets. As of July 31, 2019, unbilled receivables were $10.1 million.
Costs Capitalized to Obtain Contracts with Customers
The Company capitalizes the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force, which were recorded as deferred commissions and other assets, depending on the expected length of the deferral, in the Company’s consolidated balance sheets.
Deferred commissions were $55.7 million as of July 31, 2019. Amortization expense with respect to deferred commissions was $4.6 million and $9.0 million for the three and six months ended July 31, 2019, respectively, and $3.4 million and $6.5 million for the three and six months ended July 31, 2018, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
10. Equity Incentive Plans and Employee Stock Purchase Plan
2008 Stock Incentive Plan and 2016 Equity Incentive Plan
The Company adopted the 2008 Stock Incentive Plan (as amended, the “2008 Plan”) in 2008 and the 2016 Equity Incentive Plan (as amended, the “2016 Plan”) in 2016, primarily for the purpose of granting stock-based awards to employees, directors and consultants. With the establishment of the 2016 Plan in December 2016, all shares available for grant under the 2008 Plan were transferred to the 2016 Plan. The Company no longer grants any stock-based awards under the 2008 Plan and any shares underlying stock options canceled under the 2008 Plan will be automatically transferred to the 2016 Plan.
Stock Options
The 2016 Plan provides for the issuance of incentive stock options to employees and nonstatutory stock options to employees, directors or consultants. The Company’s Board of Directors or a committee thereof determines the vesting schedule for all equity awards. Stock option awards generally vest over a period of four years with 25% vesting on the one-year anniversary of the award and the remainder vesting monthly over the next 36 months of the grantee’s service to the Company.
The following table summarizes stock option activity for the six months ended July 31, 2019 (in thousands, except share and per share data and years):
 
Shares
 
Weighted-
Average
Exercise
Price Per
Share
 
Weighted-
Average
Remaining
Contractual
Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance - January 31, 2019
8,621,010

 
$
7.75

 
6.7
 
$
729,392

Stock options exercised
(1,497,444
)
 
7.56

 
 
 
 
Stock options forfeited and expired
(134,012
)
 
10.82

 
 
 
 
Balance - July 31, 2019
6,989,554

 
$
7.74

 
6.3
 
$
946,975

Vested and exercisable - January 31, 2019
5,342,183

 
$
6.95

 
6.0
 
$
456,275

Vested and exercisable - July 31, 2019
4,660,444

 
$
7.02

 
5.7
 
$
634,751



19

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


Restricted Stock Units
The 2016 Plan provides for the issuance of restricted stock units (“RSUs”) to employees, directors and consultants. RSUs granted to new employees generally vest over a period of four years with 25% vesting on the one-year anniversary of the vesting start date and the remainder vesting quarterly over the next 12 quarters, subject to the grantee’s continued service to the Company. RSUs granted to existing employees generally vest quarterly over a period of four years, subject to the grantee’s continued service to the Company.
The following table summarizes RSU activity for the six months ended July 31, 2019:
 
Shares
 
Weighted-Average Grant Date Fair Value per RSU
Unvested - January 31, 2019
1,988,774

 
$
54.22

RSUs granted
1,313,327

 
112.54

RSUs vested
(332,933
)
 
57.23

RSUs forfeited and canceled
(138,614
)
 
73.65

Unvested - July 31, 2019
2,830,554

 
$
79.97


2017 Employee Stock Purchase Plan
In October 2017, the Company’s Board of Directors adopted, and stockholders approved, the 2017 Employee Stock Purchase Plan (the “2017 ESPP”). A total of 2.0 million shares of the Company’s Class A common stock have been authorized for issuance under the 2017 ESPP. Subject to any plan limitations, the 2017 ESPP allows eligible employees to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s Class A common stock at a discounted price per share. Except for the initial offering period, the ESPP provides for separate six-month offering periods. The initial offering period began October 18, 2017 and ended June 15, 2018. During the three months ended July 31, 2019, the Company issued 90,619 shares of Class A common stock under the 2017 ESPP.
Unless otherwise determined by the Board of Directors or a committee thereof, the Company’s Class A common stock will be purchased for the accounts of employees participating in the 2017 ESPP at a price per share that is the lesser of (1) 85% of the fair market value of the Company’s Class A common stock on the first trading day of the offering period, which for the initial offering period was the price at which shares of the Company’s Class A common stock were first sold to the public, or (2) 85% of the fair market value of the Company’s Class A common stock on the last trading day of the offering period.
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s unaudited condensed consolidated statements of operations is as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Cost of revenue—subscription
$
1,214

 
$
489

 
$
2,202

 
$
848

Cost of revenue—services
721

 
281

 
1314

 
465

Sales and marketing
5,944

 
2,129

 
10,884

 
4,347

Research and development
6,114

 
2,904

 
10,634

 
5,110

General and administrative
3,669

 
3,206

 
6,637

 
5,816

Total stock-based compensation expense
$
17,662

 
$
9,009

 
$
31,671

 
$
16,586


11. Net Loss Per Share
The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period, including stock options and

20

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


restricted stock units. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive due to the net loss reported for each period presented.
The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. As the liquidation and dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
Net loss
$
(37,336
)
 
$
(27,782
)
 
$
(70,576
)
 
$
(54,337
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
Net loss per share, basic and diluted
$
(0.67
)
 
$
(0.54
)
 
$
(1.28
)
 
$
(1.07
)

The shares underlying the conversion option in the Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive. Based on the initial conversion price, the entire outstanding principal amount of the Notes as of July 31, 2019 would have been convertible into approximately 4.4 million shares of the Company’s Class A common stock. However, the Company currently expects to settle the principal amount of the Notes in cash. As a result, only the amount by which the conversion value exceeds the aggregate principal amount of the Notes (the “conversion spread”) is considered in the diluted earnings per share computation under the treasury stock method. The conversion spread has a dilutive impact on diluted net income per share when the average market price of the Company’s Class A common stock for a given period exceeds the initial conversion price of $68.15 per share for the Notes. In connection with the issuance of the Notes, the Company entered into Capped Calls, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. 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.
During the three months ended July 31, 2019, the average market price of the Company’s Class A common stock was $150.59, which exceeded the initial conversion price. The Company had not received any conversion notices through the issuance date of these unaudited condensed consolidated financial statements. For disclosure purposes, the Company calculated the potentially dilutive effect of the conversion spread, which is included in the table below.
The following weighted-average outstanding potentially dilutive shares of common stock were excluded from the computation of diluted net loss per share for the periods presented because the impact of including them would have been anti-dilutive.
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2019
 
2018
 
2019
 
2018
Stock options to purchase Class A common stock
2,212,684

 
3,361,686

 
2,342,061

 
3,450,512

Stock options to purchase Class B common stock
5,185,198

 
8,271,986

 
5,442,820

 
8,636,638

Unvested restricted stock units
2,926,998

 
1,441,964

 
2,744,235

 
1,044,241

Early exercised stock options
31,583

 
132,297

 
39,480

 
172,778

Shares underlying the conversion spread in the convertible senior notes
2,409,899

 

 
2,177,490

 



21

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


12. Income Taxes
The Company recorded a provision (benefit) related to income taxes of $(3.3) million and $(3.5) million for the three and six months ended July 31, 2019, respectively, and $0.2 million and $0.7 million for the three and six months ended July 31, 2018, respectively. The overall benefit recorded during the three and six months ended July 31, 2019 was driven by a net release of $3.5 million in the Company’s valuation allowance on deferred tax assets primarily as a result of deferred taxes recorded in purchase accounting as part of the Realm acquisition. The provision related to income taxes during the prior-year periods was primarily due to foreign taxes offset by excess tax deductions in the United Kingdom with respect to stock option exercises. The calculation of income taxes is based upon the estimated annual effective tax rates for the year applied to the current period income (loss) before tax plus the tax effect of any significant unusual items, discrete events or changes in tax law.
The Company assesses uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Tax. As of July 31, 2019, the Company’s net unrecognized tax benefits totaled $4.6 million, of which $0.1 million would impact the Company’s effective tax rate if recognized. The Company anticipates that the amount of reasonably possible unrecognized tax benefits that could decrease over the next twelve months due to the expiration of certain statutes of limitations and settlement of tax audits is not material to the Company’s interim unaudited condensed consolidated financial statements.

22


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Unless the context otherwise indicates, references in this report to the terms “MongoDB,” “the Company,” “we,” “our” and “us” refer to MongoDB, 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 ended January 31, 2019 (the “2019 Form 10-K”). All information presented herein is based on our fiscal calendar, which ends January 31. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ended January 31 and the associated quarters, months and periods of those fiscal years. Effective February 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) as discussed in the Company’s consolidated financial statements and related notes “Recently Adopted Accounting Pronouncements.” All amounts and disclosures in this Quarterly Report on Form 10-Q have been updated to comply with the new revenue standard.
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 operating expenses. 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, the 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 the SEC.
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. Software applications are redefining 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 in New York City and our total headcount was 1,491 as of July 31, 2019, an increase from 1,055 as of July 31, 2018.
We generate revenue primarily from sales of subscriptions, which accounted for 95% and 94% of our total revenue for the three and six months ended July 31, 2019, respectively, and 92% of our total revenue for both the three and six months ended July 31, 2018. Our primary subscription package is MongoDB Enterprise Advanced, which represented 52% and 53% of our subscription revenue for the three and six months ended July 31, 2019, respectively, and 64% and 65% of our subscription revenue for the three and six months ended July 31, 2018, respectively. For the fiscal years ended January 31, 2019, 2018 and 2017, MongoDB Enterprise Advanced represented 60%, 69% and 72% of our subscription revenue, respectively. MongoDB Enterprise Advanced is our comprehensive offering for enterprise customers that can be run in the cloud, on-premise or in a hybrid environment, and includes our proprietary commercial database server, enterprise management capabilities, our graphical user interface, analytics integrations, technical support and a commercial license to our platform.

23


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 with MongoDB without all the features of our commercial platform. As a result, our direct sales prospects are often familiar with our platform and may have already built applications using our technology. We sell subscriptions directly through our field and inside sales teams, as well as indirectly through channel partners. Our subscription offerings are generally priced on a per server basis, subject to a per server RAM limit. The majority of our subscription contracts are one year in duration and invoiced upfront. When we enter into multi-year subscriptions, we typically invoice the customer on an annual basis.
We introduced MongoDB Atlas in June 2016. MongoDB Atlas is our cloud-hosted 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 ended July 31, 2019, MongoDB Atlas revenue represented 37% and 36% of our total revenue, respectively, and during the three and six months ended July 31, 2018, MongoDB Atlas revenue represented 18% and 16% of our total revenue, respectively, reflecting the continued growth of MongoDB Atlas since its introduction. We have experienced strong growth in self-serve customers of MongoDB Atlas. These customers are charged monthly 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 commitments and pay in advance or are invoiced monthly based on usage. Given our platform has been downloaded from our website more than 70 million times since February 2009 and over 30 million times in the last 12 months alone, a core component of our growth strategy for MongoDB Atlas is to convert developers and their organizations who are already using Community Server to become customers of MongoDB Atlas and enjoy the benefits of a managed offering.
We also generate revenue from services, which consist primarily of fees associated with consulting and training services. Revenue from services accounted for 5% and 6% of our total revenue for the three and six months ended July 31, 2019, respectively, and 8% of our total revenue for both the three and six months ended July 31, 2018. 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 $64 billion in 2019 growing to approximately $98 billion in 2023, representing an 11% 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.
Key Factors Affecting Our Performance
Growing Our Customer Base
We are 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 of July 31, 2019, we had over 15,000 customers across a wide range of industries and in over 100 countries, compared to over 7,400 customers as of July 31, 2018. All affiliated entities are counted as a single customer.
Our customer count as of July 31, 2019 includes customers acquired from ObjectLabs Corporation (“mLab”) and Tightdb, Inc. (“Realm”), which acquisitions closed on November 1, 2018 and May 7, 2019, respectively. Our definition of “customer” excludes (1) users of our free offerings, (2) users acquired from mLab who spend $20 or less per month with us and (3) self-serve users acquired from Realm. The excluded mLab and Realm users collectively represent an immaterial portion of the revenue associated with users acquired from those acquisitions.
As of July 31, 2019, we had over 1,850 customers that were sold through our direct sales force and channel partners, as compared to over 1,600 such customers as of July 31, 2018. These customers, which we refer to as our Direct Sales Customers, accounted for 78% and 77% of our subscription revenue for the three and six months ended July 31, 2019, respectively, and 87% and 88% of our subscription revenue for the three and six months ended July 31, 2018, respectively.
Increasing Adoption of MongoDB Atlas
MongoDB Atlas, our hosted multi-cloud offering, is an important part of our run-anywhere strategy. With MongoDB Atlas, customers can enjoy the benefits of consuming MongoDB as a service in the public cloud, enabling customers to remove themselves from the complexity of managing the database and related underlying infrastructure. We initially

24


launched MongoDB Atlas in 2016 and generated revenue by migrating existing users of our Community Server. During 2018, we expanded the functionality available in MongoDB Atlas beyond that of our Community Server offering, including adding advanced security features, enterprise-standard authentication and database auditing to MongoDB Atlas to allow Atlas to support mission-critical enterprise workloads.
MongoDB Atlas is available on all three major cloud providers (Amazon Web Services (“AWS”), Google Cloud Platform (“GCP”) and Microsoft Azure) in North America, Europe and Asia Pacific. In addition, MongoDB Atlas is available on AWS Marketplace, making it easier for AWS customers to buy and consume MongoDB Atlas. We recently announced a new business partnership with GCP that will provide deeper product integration and unified billing for GCP customers who are also MongoDB Atlas customers. This partnership will allow GCP customers a seamless integration of all the features of MongoDB Atlas with GCP’s identity and access management, logging and monitoring, Kubernetes and Tensorflow. We also announced an expanded relationship with Microsoft. The new availability of MongoDB Atlas on the Microsoft Azure Marketplace will offer unified billing for joint customers of MongoDB Atlas and Microsoft and will make it easier for established Azure customers to purchase and use MongoDB Atlas. In addition, MongoDB will be part of Microsoft’s strategic partner program.
We have invested significantly in MongoDB Atlas and our ability to drive adoption of MongoDB Atlas is a key component of our growth strategy. We offer a free tier on AWS, GCP and Microsoft Azure, which provides limited processing power and storage, in order to drive usage and adoption of MongoDB Atlas among developers. In addition, we offer tools to easily migrate existing users of our Community Server offering to MongoDB Atlas. From its launch in June 2016, we have grown MongoDB Atlas to over 13,200 customers as of July 31, 2019. The growth in MongoDB Atlas customers included new customers to MongoDB and existing MongoDB Enterprise Advanced customers adding incremental MongoDB Atlas workloads, as well as customers from mLab, as described above.
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 capacity, our customers increase their subscriptions to our platform. 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, which can include offering centralized internal support or providing MongoDB-as-a-service internally. Over time, the average subscription amount for our Direct Sales Customers has increased. In addition, self-service customers have begun to increase their consumption of our products, particularly MongoDB Atlas.
We monitor annualized recurring revenue (“ARR”) to help us measure our subscription performance. We define ARR as the subscription revenue we would contractually expect to receive from customers over the following 12 months assuming no increases or reductions in their subscriptions. ARR excludes self-service products, including MongoDB Atlas not sold on a commitment basis. ARR also excludes professional services. For customers who utilize our self-service offerings, we measure the annualized monthly recurring revenue (“MRR”), which is calculated by annualizing their usage of our self-serve products in the prior 30 days and assuming no increases or reductions in their usage. The number of customers with $100,000 or greater in ARR and annualized MRR was 622 and 438 as of July 31, 2019 and 2018, 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.
Components of Results of Operations
Revenue
Subscription Revenue. We derive subscription revenue by offering subscriptions to our platform and hosted database-as‑a‑service solutions. Revenue from subscriptions to our platform is recognized upfront for the license component and ratably for the technical support and when-and-if available update components. Revenue from our hosted database-as‑a‑service solutions is primarily generated on a usage basis and is billed either in arrears or paid up front. The majority of our subscription contracts are one year in duration and are invoiced upfront. Our subscription contracts are generally non-cancelable and non-refundable. When we enter into multi-year subscriptions, we typically invoice the customer on an annual basis.

25


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, 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 consumption‑based customers.
Cost of Revenue
Cost of Subscription Revenue. Cost of subscription revenue primarily 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. Our cost of subscription revenue for our hosted as‑a‑service solutions includes third‑party cloud infrastructure expenses. We expect our cost of subscription revenue to increase in absolute dollars as our subscription revenue increases and, depending on the results of MongoDB Atlas, our cost of subscription revenue may increase as a percentage of subscription revenue as well.
Cost of Services Revenue. Cost of services revenue primarily includes personnel costs, including salaries, bonuses and benefits, and stock‑based 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 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 stock‑based compensation. These expenses also include costs related to marketing programs, travel‑related expenses and allocated overhead. Marketing programs consist of advertising, events, corporate communications, and brand‑building and developer‑community 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 channel program.
Research and Development. Research and development expense consists primarily of personnel costs, including salaries, bonuses and benefits, and stock‑based 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 stock‑based 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 and incur the costs of compliance associated with being a publicly traded company.
Other Income (Expense), net
Other income (expense), net consists primarily of interest income and gains and losses from foreign currency transactions.

26


Provision (Benefit) for Income Taxes
Provision for income taxes consists primarily of state income taxes in the United States and income taxes in certain foreign jurisdictions in which we conduct business. As of January 31, 2019, we had net operating loss (“NOL”) carryforwards for federal, state and Irish income tax purposes of $369.2 million, $246.3 million and $189.5 million, respectively, which may be available to offset taxable income in the future, subject to changes made by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) with respect to federal NOLs and which begin to expire in the year ending January 31, 2028 for federal purposes and January 31, 2020 for state purposes if not utilized. The Tax Act included changes to the uses and limitations of NOLs. While the Tax Act allows for federal NOLs incurred in tax years beginning prior to December 31, 2017 to be carried forward indefinitely, the Tax Act also imposes an 80% limitation on the use of federal NOLs that are generated in tax years beginning after December 31, 2017. Ireland allows NOLs to be carried forward indefinitely. The deferred tax assets associated with the NOL carryforwards in each of these jurisdictions are subject to a full valuation allowance.
Three and Six Months Ended July 31, 2019 Summary
For the three months ended July 31, 2