🔥 Earnings: MongoDB, Elastic Search, & Pure Storage

Tech earnings are on fire… MDB is up 13%, ESTC is up 15%, and PSTG is up 18%

MongoDB (MDB) Q1 2023 Financial Results

“We believe that our Q1 performance is additional evidence that MongoDB is leading the market through a major secular transition, which is still in the very early innings.”

- Dev Ittycheria, MongoDB President, CEO & Director

Q1 FY 2023 Financial Highlights

Revenue: $285 million (+57% Y/Y), beat prior guidance by $20 million, beat analyst expectations by $18.3 millionGross Profit: $207 million, representing a 73% gross margin compared to 70% in Q1’22Non-GAAP EPS: $0.20, beat prior guidance by $0.30, beat analyst expectations by $0.30GAAP EPS: (-$1.14) compared to (-$1.04) in Q1’22 Free Cash Flow: $8.4 million compared to $8.4 million in Q1’22Cash, cash equivalents, short-term investments, and restricted cash: $1.8B

Business Highlights

MongoDB Atlas revenue up 82% YoY representing 60% of total Q1 revenue

Customer count: 35,200 as of April 30, 2022

Customer win: A leading global semiconductor company chose MongoDB's data platform to power its new business unit that focuses on next-generation technology geared towards AI, robotics and autonomous vehicles. The group chose MongoDB Atlas to provide real-time alerts on the manufacturing floor as well as implement search capabilities to their end customers, all while improving performance.

Partnership: Announced a new multi-year strategic collaboration with AWS that includes integrated go-to-market activities for sales and marketing, as well as technology integrations and incentives to streamline the migration of on-premise workloads to MongoDB Alas on AWS.

Q2 and FY 2023 Guidance

FY 2023 revenue mid-point guidance increased by $16 million over midpoint guidance of $1,166 million provided in Q4. They beat their Q1’23 guide by $15 million which means management is conservatively confident (I just made that up) that they will continue beating prior expectations for FY 23.

Non-GAAP Net Loss per share guidance is improved from a midpoint of (-$0.40) to a midpoint of (-$0.24)

Management Commentary

“Overall, our market opportunity is robust and unchanged from when we last spoke to you. Having lived through a few macro downturns in my career, I'm confident in our ability to win workloads even in an environment where IT budgets could come under pressure””Our customers use us for mission-critical initiatives. As the economy becomes increasingly enabled by digitalization, we believe companies will continue to prioritize building custom software that provides a better customer experience, enables new capabilities or drives greater operational efficiency in their business.””We operate in a very large market and, despite our success, still have tiny share. We are fortunate to have significant growth opportunities in this market, including the ability to continue to acquire new customers and expand our footprint by adding new workloads within our installed base of more than 35,000 customers”

“Our interests are well aligned with those of our customers. When the underlying application grows in usage, which in turn delivers more value, the customer pays us more. It's as simple as that.”

Austin’s Take: bullish

MongoDB continues to execute extremely. Their results should be viewed as bullish for cloud/SAAS stocks in general. Management’s commentary was conservative, but confident and speaks to the importance of investors finding companies that innovate quickly and offer business-critical products/services as we enter a potential recession/constrained budget environment.

MongoDB is hosting an investor session on June 7th (link) which I will cover in a future email.

At this time I have no position in MDB

Elastic Search (ESTC) Q4, 2022 Results

“The strong momentum in Elastic Cloud puts us on the path to deliver over 50% of total revenue from Elastic Cloud exiting Q4 of fiscal year 2024, which is ahead of our prior outlook. The enormous market opportunity, the strategic relevance of our solutions to our customers and partners, and the momentum in Elastic Cloud make us confident that we can achieve $2 billion in total revenue in fiscal year 2025.”

- Ash Kulkarni, CEO

Q4 Financial Highlights

Revenue: $239 million, up35% YoY, beat guidance by $8 million beat analyst expectations by $7 millionElastic Cloud Revenue: $87.7 million, up 71% YoYNon-GAAP operating margin: -3%Non-GAAP EPS: (-$0.16), beat guidance by $0.06 beat analyst expectations by $0.05Operating cash flow: -$3.1 millionAdj free cash flow: -$5.3 million

FY 22 Financial Highlights

Revenue: $862.4 million, up 42% year-over-yearElastic Cloud Revenue: $298.6 million, up 80% year-over-yearGAAP operating loss: $173.7 million; GAAP operating margin was -20%Non-GAAP operating profit: $0.9 million; non-GAAP operating margin was 0%GAAP net loss per share: $2.20; non-GAAP net loss per share was $0.33Operating cash flow: $5.7 million Adjusted free cash flow: $10.7 million

Business Highlights

Subscription customer count: 18,600, up from 17,900 last quarter and up from 15,000 in Q4’21.Customers w/annual contract value over $100k: 960 compared to 890 last quarter and 730 in Q4’21Net Expansion Rate: 130%, flat YoY

Partnership: announced expanded collaboration with AWS to build, market, and deliver seamless access for shared customers

Partnership: announced strategic partnership with Microsoft to make it easy to bring data from Azure services into Elastic, and added four new Azure regions in the Americas, Asia, and Africa.

Financial Outlook

For the first quarter of fiscal 2023 (ending July 31, 2022):

Total revenue is expected to be between $244 million and $246 million, representing 27% year-over-year growth at the midpoint

Non-GAAP operating margin is expected to be between -3.8% and -2.8%

Non-GAAP net loss per share is expected to be between $0.20 and $0.16, assuming between 94.0 million and 95.0 million weighted average ordinary shares outstanding

For fiscal 2023 (ending April 30, 2023):

Total revenue is expected to be between $1,080 million and $1,086 million, representing 26% year-over-year growth at the midpoint

Non-GAAP operating margin is expected to be between 0.0% and 0.5%

Non-GAAP net loss per share is expected to be between $0.36 and $0.28, assuming between 95.0 million and 97.0 million weighted average ordinary shares outstanding

Management Commentary

“In Q4, annual commitments from new and existing customers to Elastic Cloud nearly doubled versus the prior year, reflecting the value that Elastic Cloud delivers to them. We saw growth across all geographies and increased mind share at all levels of the business.”

“As another indicator of our deepening customer relevance and the criticality of our solutions, our net expansion rate for Elastic Cloud has been increasing for the past several quarters and was over 140% in Q4. Based on the continuing customer adoption of all our solutions and our momentum in Elastic Cloud, we expect to achieve $2 billion in revenue in fiscal year '25 within the next 3 years, while also continuing to grow our operating margin over time.”

“We are seeing strong demand for Elastic Security, which directionally represented roughly 25% of ACV in FY '22. Customers tell us that security continues to be top of mind as they prepare for and respond to growing global cybersecurity threats.”

Austin’s Take: bullish considering how “cheap” the stock is

Shares of Elastic have been crushed. It’s currently trading at forward an enterprise value to forward revenue (forward EV/R) of 5, the lowest it has ever traded since it came public in 2019 with gross margin of 75% and expected FY23 revenue growth of 26%, FY24 growth of 28%, and FY25 growth of 24%

The unanswered question about ESTC remains its ability to be profitable without totally compromising growth.

At this time I have no position in ESTC.

Pure Storage Q1 Fy 2023 Financial Results

“We believe that we are now positioned to see secular growth, less affected by this economic cycle than our competitors. Our full views of the impact of all these events are taken into consideration in our guidance. Overall, we have never been more optimistic about Pure's opportunity and growth prospects.”

First Quarter Financial Highlights

Revenue: $620.4 million, up 50% year-over-year, beat guidance by $100 million, beat analyst expectations by $99 million

Non-GAAP EPS: $0.25, beat analyst expectations by $0.20

Subscription services revenue: $219.2 million, up 35% year-over-year

Subscription Annual Recurring Revenue (ARR): $899.8 million, up 29% year-over-year

Remaining Performance Obligations (RPO): $1.4 billion, up 26% year-over-year

GAAP gross margin 68.7%; non-GAAP gross margin 70.6%

GAAP operating loss $(4.6) million; non-GAAP operating income $85.4 million, beat Non-GAAP guidance of $16 million

GAAP operating margin (0.7)%; non-GAAP operating margin 13.8%, beat Non-GAAP guidance of 3%

Operating cash flow $220.1 million; free cash flow $187.3 million

Total cash, cash equivalents, and investments $1.3 billion

Returned approximately $66 million in Q1 to stockholders through share repurchases

First Quarter Company Highlights

Market-Leading Portfolio Innovation: Pure Fusion and Portworx Data Services are now generally available, enabling customers to bring infrastructure and applications closer together with cloud-like automation and storage delivery for traditional and cloud-native applications.

Pure's FlashBlade was recognized as a leader in the 2022 IDC MarketScape for Distributed Scale Out File Storage due to its ease of use, consistent performance at scale, metadata architecture, and customer experience.

Pure announced new partnerships with Snowflake and Kyndryl, and an expanded partnership with Amazon Web Services (AWS) in Q1 to deliver expertise, mission-critical capabilities, and enablement programs to global enterprises.

Pure//Accelerate® techfest22 will take place in-person in Los Angeles and virtually on June 8.

Q2 and FY23 Guidance

Q2 Revenue: $635 million

Non-GAAP Operating income: $75 million

Non-GAAP Operating Margin: 11.8%

FY 23 Revenue: $2.66 billion, previous guidance was $2.6 billion

Non-GAAP Operating Income: $320 million, previous guidance was $300 million

Non-GAAP Operating Margin: 12%, previous guidance was 11.5%

Management Commentary

“We believe inflation will be present for some time and will also cause both stock market rebalancing as well as monetary and fiscal responses. And this will certainly have economic effects in our market. However, we believe its influence on IT customer behavior will be muted in aggregate and even less for Pure. First, enterprises have now made digital transformation top on their list for the success of their organizations. Next, we believe Pure has entered a second phase of growth, enabled by an expanding portfolio of highly differentiated and leading products as well as sales and business models spanning commercial, enterprise and cloud customers.”

“The way we're looking at the macro is a little bit different. I would say we have not yet seen affects -- the macro affecting us or the customers that we speak to, but we are not blind to the fact that the macro and the possibility of economic slowdown can affect us going forward.”

“Our second phase of growth is the fact that we can penetrate more into larger customers with an expanded and superior portfolio, and that's going to give us a runway, a pretty long runway to continue what I believe is going to be a second phase of growth. And we're now -- we now have the scale, if you will, to compete with any of our competitors and deploy our unfair advantage of leadership products. So that's how I phrased the second phase of growth.”

Austin’s Take: very bullish

Pure Storage is now trading at a forward EV/R of 2.5 with gross margin of 70% and FY23 revenue growth expected to be 21% YoY, dropping to the mid-teens in FY24 and 25.

Upcoming Coverage

Friday all subscribers will receive a news round-up from growth stock land that includes stories I wasn’t able to focus on in this week’s emails

Monday all subscribers will get an overview of Crowdstrike’s (CRWD) earnings

Tuesday: paid subscribers will get a full portfolio update and a deeper review of CRWD earnings as well as my takeaways from Datadog’s (DDOG) and Cloudflare’s (NET) presentations at Jefferies Software Conference on 6/1

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