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Section 1: 10-Q (10-Q)

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM 10-Q
___________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2020
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 August 31, 2020, there were 58,868,997 shares of the registrant’s Class A common stock, par value $0.001 per share, outstanding.
 



Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 




Table of Contents

PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
MONGODB, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
 
July 31, 2020
 
January 31, 2020
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
469,492

 
$
706,192

Short-term investments
505,404

 
280,326

Accounts receivable, net of allowance for doubtful accounts of $4,368 and $2,515 as of July 31, 2020 and January 31, 2020, respectively
87,193

 
85,554

Deferred commissions
27,453

 
24,219

Prepaid expenses and other current assets
15,281

 
16,905

Total current assets
1,104,823

 
1,113,196

Property and equipment, net
62,154

 
58,316

Operating lease right-of-use assets
40,481

 
11,147

Goodwill
55,830

 
55,830

Acquired intangible assets, net
30,525

 
34,779

Deferred tax assets
744

 
615

Other assets
60,606

 
54,684

Total assets
$
1,355,163

 
$
1,328,567

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,631

 
$
2,849

Accrued compensation and benefits
43,377

 
41,427

Operating lease liabilities
4,863

 
3,750

Other accrued liabilities
24,625

 
26,860

Deferred revenue
176,165

 
167,498

Total current liabilities
252,661

 
242,384

Deferred tax liability, non-current
826

 
821

Operating lease liabilities, non-current
38,873

 
8,113

Deferred revenue, non-current
18,851

 
23,281

Convertible senior notes, net
935,292

 
911,075

Other liabilities, non-current
60,509

 
60,035

Total liabilities
1,307,012

 
1,245,709

Commitments and contingencies (Note 7)


 


Stockholders’ equity:
 
 
 
Class A common stock, par value of $0.001 per share; 1,000,000,000 shares authorized as of July 31, 2020 and January 31, 2020; 58,957,104 shares issued and 58,857,733 shares outstanding as of July 31, 2020; 48,512,090 shares issued and outstanding as of January 31, 2020
59

 
48

Class B common stock, par value of $0.001 per share; no shares and 100,000,000 authorized as of July 31, 2020 and January 31, 2020, respectively; no shares issued and outstanding as of July 31, 2020; 8,969,824 shares issued and 8,870,453 shares outstanding as of January 31, 2020

 
9

Additional paid-in capital
836,293

 
752,127

Treasury stock, 99,371 shares (repurchased at an average of $13.27 per share) as of July 31, 2020 and January 31, 2020
(1,319
)
 
(1,319
)
Accumulated other comprehensive income
69

 
225

Accumulated deficit
(786,951
)
 
(668,232
)
Total stockholders’ equity
48,151

 
82,858

Total liabilities and stockholders’ equity
$
1,355,163

 
$
1,328,567

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

1

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2020
 
2019
 
2020
 
2019
Revenue:
 
 
 
 
 
 
 
Subscription
$
132,478

 
$
94,156

 
$
257,334

 
$
178,150

Services
5,803

 
5,212

 
11,276

 
10,606

Total revenue
138,281

 
99,368

 
268,610

 
188,756

Cost of revenue:
 
 
 
 
 
 
 
Subscription
33,973

 
24,373

 
64,598

 
46,968

Services
8,331

 
5,829

 
15,383

 
11,406

Total cost of revenue
42,304

 
30,202

 
79,981

 
58,374

Gross profit
95,977

 
69,166

 
188,629

 
130,382

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
75,078

 
53,524

 
144,203

 
99,644

Research and development
49,255

 
37,140

 
94,887

 
68,008

General and administrative
21,424

 
16,174

 
41,359

 
30,979

Total operating expenses
145,757

 
106,838

 
280,449

 
198,631

Loss from operations
(49,780
)
 
(37,672
)
 
(91,820
)
 
(68,249
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
1,032

 
2,231

 
3,759

 
4,534

Interest expense
(13,950
)
 
(4,940
)
 
(27,745
)
 
(9,629
)
Other expense, net
(845
)
 
(296
)
 
(1,470
)
 
(711
)
Loss before provision for (benefit from) income taxes
(63,543
)
 
(40,677
)
 
(117,276
)
 
(74,055
)
Provision for (benefit from) income taxes
982

 
(3,341
)
 
1,216

 
(3,479
)
Net loss
$
(64,525
)
 
$
(37,336
)
 
$
(118,492
)
 
$
(70,576
)
Net loss per share, basic and diluted
$
(1.10
)
 
$
(0.67
)
 
$
(2.04
)
 
$
(1.28
)
Weighted-average shares used to compute net loss per share, basic and diluted
58,393,894

 
55,647,707

 
58,025,799

 
55,186,945

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

2

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2020
 
2019
 
2020
 
2019
Net loss
$
(64,525
)
 
$
(37,336
)
 
$
(118,492
)
 
$
(70,576
)
Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
Unrealized gain (loss) on available-for-sale securities
(531
)
 
21

 
317

 
79

Foreign currency translation adjustment
(398
)
 
(250
)
 
(473
)
 
(237
)
Other comprehensive loss
(929
)
 
(229
)
 
(156
)
 
(158
)
Total comprehensive loss
$
(65,454
)
 
$
(37,565
)
 
$
(118,648
)
 
$
(70,734
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
 
Class A and
Class B
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balances as of January 31, 2020
57,382,543

 
$
57

 
$
752,127

 
$
(1,319
)
 
$
225

 
$
(668,232
)
 
$
82,858

Cumulative effect of accounting change

 

 

 

 

 
(227
)
 
(227
)
Stock option exercises
373,394

 
1

 
2,994

 

 

 

 
2,995

Repurchase of early exercised options
(79
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
42

 

 

 

 
42

Vesting of restricted stock units
241,569

 

 

 

 

 

 

Stock-based compensation

 

 
30,567

 

 

 

 
30,567

Conversion of 2024 convertible senior notes
8

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 

 
848

 

 
848

Foreign currency translation adjustment

 

 

 

 
(75
)
 

 
(75
)
Net loss

 

 

 

 

 
(53,967
)
 
(53,967
)
Balances as of April 30, 2020
57,997,435

 
58

 
785,730

 
(1,319
)
 
998

 
(722,426
)
 
63,041

Stock option exercises
471,269

 
1

 
4,050

 

 

 

 
4,051

Repurchase of early exercised options
(881
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 
25

 

 

 

 
25

Vesting of restricted stock units
305,428

 

 

 

 

 

 

Stock-based compensation

 

 
37,525

 

 

 

 
37,525

Issuance of common stock under the Employee Stock Purchase Plan
84,482

 

 
8,963

 

 

 

 
8,963

Unrealized loss on available-for-sale securities

 

 

 

 
(531
)
 

 
(531
)
Foreign currency translation adjustment

 

 

 

 
(398
)
 

 
(398
)
Net loss

 

 

 

 

 
(64,525
)
 
(64,525
)
Balances as of July 31, 2020
58,857,733

 
$
59

 
$
836,293

 
$
(1,319
)
 
$
69

 
$
(786,951
)
 
$
48,151


4

Table of Contents

 
Class A and
Class B
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Income (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 gain 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 gain 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.

5

Table of Contents

MONGODB, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Six Months Ended July 31,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net loss
$
(118,492
)
 
$
(70,576
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
5,722

 
6,029

Stock-based compensation
68,092

 
31,671

Amortization of debt discount and issuance costs
24,217

 
6,498

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

 
1,988

Amortization of operating right-of-use assets
2,854

 
1,119

Non-cash interest on finance lease liabilities

 
1,823

Deferred income taxes
(148
)
 
(4,232
)
Accretion of discount on short-term investments
(221
)
 
(2,751
)
Change in operating assets and liabilities:
 
 
 
Accounts receivable
(2,408
)
 
6,220

Prepaid expenses and other current assets
1,846

 
(125
)
Deferred commissions
(8,993
)
 
(7,046
)
Other long-term assets
(156
)
 
27

Accounts payable
(1,410
)
 
440

Accrued liabilities
3,393

 
8,285

Operating lease liabilities
(38
)
 
(1,082
)
Deferred revenue
4,956

 
12,333

Other liabilities, non-current
2,890

 

Net cash used in operating activities
(15,908
)
 
(9,379
)
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(5,296
)
 
(1,596
)
Acquisition, net of cash acquired

 
(38,629
)
Proceeds from maturities of marketable securities
285,000

 
280,000

Purchases of marketable securities
(510,006
)
 
(209,025
)
Net cash provided by (used in) investing activities
(230,302
)
 
30,750

Cash flows from financing activities
 
 
 
Payments of issuance costs for convertible senior notes
(4,154
)
 

Proceeds from exercise of stock options, including early exercised stock options
7,051

 
11,350

Proceeds from the issuance of common stock under the Employee Stock Purchase Plan
8,963

 
6,394

Repurchase of early exercised stock options
(11
)
 
(31
)
Principal repayments of finance leases
(2,284
)
 

Net cash provided by financing activities
9,565

 
17,713

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(47
)
 
(233
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(236,692
)
 
38,851

Cash, cash equivalents and restricted cash, beginning of period
706,706

 
148,347

Cash, cash equivalents and restricted cash, end of period
$
470,014

 
$
187,198

Supplemental cash flow disclosure
 
 
 
Cash paid during the period for:
 
 
 
Income taxes, net of refunds
$
658

 
$
1,523

Interest expense
$
3,535

 
$
1,125

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
$
469,492

 
$
186,684

Restricted cash, non-current
522

 
514

Total cash, cash equivalents and restricted cash
$
470,014

 
$
187,198

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

6

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


1.
Organization and Description of Business
MongoDB, Inc. (“MongoDB” or the “Company”) was originally incorporated in the state of Delaware in November 2007 under the name 10Gen, Inc. In August 2013, the Company changed its name to MongoDB, Inc. The Company is headquartered in New York City. MongoDB is the leading, modern, general purpose database platform. The Company’s robust platform enables developers to build and modernize applications rapidly and cost-effectively across a broad range of use cases. Organizations can deploy the Company’s platform at scale in the cloud, on-premise or in a hybrid environment. In addition to selling its software, the Company provides post-contract support, training and consulting services for its offerings. The Company’s fiscal year ends January 31.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated balance sheet as of July 31, 2020, the interim condensed consolidated statements of stockholders’ equity for the three and six months ended July 31, 2020 and 2019, the interim condensed consolidated statements of operations and of comprehensive loss for the three and six months ended July 31, 2020 and 2019 and the interim condensed consolidated statements of cash flows for the six months ended July 31, 2020 and 2019 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, 2020, its statements of stockholders’ equity as of July 31, 2020 and 2019, its results of operations and of comprehensive loss for the three and six months ended July 31, 2020 and 2019 and its statements of cash flows for the six months ended July 31, 2020 and 2019. 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, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2021 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. The condensed balance sheet data as of January 31, 2020 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, 2020 (the “2020 Form 10-K”).
Use of Estimates
The preparation of the interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments 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, the incremental borrowing rate related to the Company’s lease liabilities, stock-based compensation, fair value of the liability component of the convertible debt, fair value of common stock and redeemable convertible preferred stock warrants prior to the initial public offering, legal contingencies, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and 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.
The ongoing COVID-19 pandemic has resulted in a global slowdown of economic activity that is likely to continue to decrease demand for a broad variety of goods and services, including from the Company’s customers, while also disrupting sales channels and marketing activities for an unknown period of time. The Company currently expects its revenue to be negatively impacted by the slowdown in activity associated with the COVID-19 pandemic in the near-term and, at least, for the year ending January 31, 2021.

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


Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or adjust the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.
Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies as described in the Company’s 2020 Form 10-K other than as a result of the adoption of the new accounting guidance related to current expected credit losses, effective February 1, 2020, as discussed in “Recently Adopted Accounting Pronouncements” below. Further disclosures with respect to the Company’s credit losses are also included in Note 3, Fair Value Measurements and Note 8, Revenue.
Related Party Transactions
All contracts with related parties are executed in the ordinary course of business. There were no material related party transactions in the three and six months ended July 31, 2020 and 2019. As of July 31, 2020 and January 31, 2020, there were no material amounts payable to or amounts receivable from related parties.
Recently Adopted Accounting Pronouncements
Goodwill Impairment. In January 2017, the FASB issued ASU 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 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, effective February 1, 2020, did not have an impact on the Company’s condensed consolidated financial statements.
Cloud Computing. In August 2018, the FASB issued ASU 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. The Company adopted ASU 2018-15, effective February 1, 2020, prospectively for implementation costs incurred after the date of adoption. ASU 2018-15 did not have an impact on the Company’s condensed consolidated financial statements upon adoption.
Credit Losses. In June 2016, the FASB issued ASU 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 receivable, including unbilled receivables, as well as certain financial instruments. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. Effective February 1, 2020, the Company adopted ASU 2016-13 using the modified retrospective transition approach, which requires a cumulative effect adjustment to the balance sheet as of February 1, 2020.
As a result of the adoption, the Company recorded a cumulative effect adjustment to increase the accumulated deficit by $0.2 million, which represented the accelerated recognition of credit losses under the expected credit loss model of calculating current expected credit losses compared to the previous incurred loss impairment model. The following two significant accounting policies have changed from the Company’s 2020 Form 10-K as a result of the adoption of ASU 2016-13.

8

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


Accounts Receivable and Allowance for Doubtful Accounts
The Company records a receivable when an unconditional right to consideration exists, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers. If revenue recognized on a contract exceeds the billings, then the Company records an unbilled receivable for that excess amount, which is included as part of accounts receivable, net in the Company’s condensed consolidated balance sheets.
The Company is exposed to credit losses primarily through the sales of subscriptions and services, which are recorded as accounts receivable, inclusive of unbilled receivables. The Company performs initial and ongoing evaluations of its customers' financial position and generally extends credit without collateral. Accounts receivable are recorded at amortized cost, net of an allowance for doubtful accounts, and do not bear interest.
The allowance for doubtful accounts represents the best estimate of lifetime expected credit losses against the existing accounts receivable, inclusive of unbilled receivables, based on certain factors including past collection experience, credit quality of the customer, current aging of the receivable balance, current economic conditions, reasonable and supportable forecasts, as well as specific circumstances arising with individual customers. Extensive judgment is required in assessing these factors. Due to the short-term nature of the Company’s accounts receivable, forecasts have limited relevance to the Company’s expected credit loss estimates. Accounts receivable are written off against the allowance when management determines a balance is uncollectible and the Company no longer actively pursues collection of the receivable. The Company’s estimates of the allowance for credit losses may not be indicative of our actual credit losses requiring additional charges to be incurred to reflect the actual amount collected.
Marketable Securities
The Company’s short-term investments consist of U.S. government treasury securities. The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its short-term investments as available-for-sale debt securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its short-term investments within current assets on the condensed consolidated balance sheets.
Available-for-sale debt securities are recorded at fair value each reporting period. Realized gains and losses are determined based on the individual security level and are reported in other income (expense), net in the condensed consolidated statements of operations. Unrealized gains on these short-term investments are reported as a separate component of accumulated other comprehensive income (loss) on the condensed consolidated balance sheets until realized.
If the estimated fair value of an available-for-sale debt security is below its amortized cost basis, then the Company evaluates for impairment. The Company considers its intent to sell the security or whether it is more likely than not that it will be required to sell the security before recovery of its amortized basis. If either of these criteria are met, the debt security’s amortized cost basis is written down to fair value through other income (expense), net in the condensed consolidated statements of operations. If neither of these criteria are met, the Company evaluates whether unrealized losses have resulted from a credit loss or other factors. The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, as well as other factors. An impairment relating to credit losses is recorded through an allowance for credit losses reported in other income (expense), net in the condensed consolidated statements of operations. The allowance is limited by the amount that the fair value of the debt security is below its amortized cost basis. When a credit loss exists, the Company compares the present value of cash flows expected to be collected from the debt security with the amortized cost basis of the security to determine what allowance amount, if any, should be recorded. Unrealized losses not resulting from credit losses are recorded through accumulated other comprehensive income (loss) on the condensed consolidated balance sheets.
New Accounting Pronouncements Not Yet Adopted
Debt. In August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new standard simplifies the accounting for convertible instruments by eliminating two of the three models in ASC 470-20 that required separate accounting for embedded conversion features. Accordingly, under ASU 2020-06, convertible debt instruments will likely be reported as a single liability instrument with no

9

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


separate accounting for embedded conversion features. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. Additionally, among other changes, the new guidance eliminates some of the conditions for equity classification in ASC 815-40-25 for contracts in an entity’s own equity, thereby permitting these equity contracts to qualify for the derivative scope exception. The new standard also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for the Company beginning February 1, 2022, although early adoption is permitted for fiscal periods beginning February 1, 2021. The new standard can be adopted using either a modified or full retrospective transition method. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.
Income Taxes. In December 2019, the FASB issued ASU 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application and simplification of GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for the Company beginning February 1, 2021, although early adoption of the amendments is permitted. The Company is currently evaluating the impact of ASU 2019-12 on its consolidated financial statements.
3.
Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of July 31, 2020 and January 31, 2020 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
 
Fair Value Measurement at July 31, 2020
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
392,950

 
$

 
$

 
$
392,950

Short-term investments:
 
 
 
 
 
 
 
U.S. government treasury securities
505,404

 

 

 
505,404

Total financial assets
$
898,354

 
$

 
$

 
$
898,354

 
Fair Value Measurement at January 31, 2020
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
623,856

 
$

 
$

 
$
623,856

Short-term investments:
 
 
 
 
 
 
 
U.S. government treasury securities
280,326

 

 

 
280,326

Total financial assets
$
904,182

 
$

 
$

 
$
904,182


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. The contractual maturity of all marketable securities was less than one year as of July 31, 2020 and January 31, 2020. As of July 31, 2020 and January 31, 2020, gross unrealized gains and losses for cash equivalents and short-term investments were not material. The Company’s unrealized gains were due to the decline in market interest rates through July 31, 2020, which created unrealized gains for securities the Company previously purchased as early as November 4, 2019. Accordingly, the Company concluded that an allowance for credit losses was unnecessary for short-term investments as of July 31, 2020. Gross realized gains and losses were immaterial for each of the three and six month periods ended July 31, 2020 and 2019.

10

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


In addition to its cash, cash equivalents and short-term investments, the Company measures the fair value of its outstanding convertible senior notes on a quarterly basis for disclosure purposes. The Company considers the fair value of its convertible senior notes at July 31, 2020 to be a Level 2 measurement due to limited trading activity of the convertible senior notes. Refer to Note 5, Convertible Senior Notes, for further details.
4.
Goodwill and Acquired Intangible Assets, Net
As of July 31, 2020, there have been no changes to the carrying amount of goodwill from the balance presented as of January 31, 2020. The gross carrying amount and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
 
July 31, 2020
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
Developed technology
$
34,700

 
$
(14,225
)
 
$
20,475

Domain name
155

 
(155
)
 

Customer relationships
15,200

 
(5,150
)
 
10,050

Total
$
50,055

 
$
(19,530
)
 
$
30,525

 
January 31, 2020
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
Developed technology
$
34,700

 
$
(11,495
)
 
$
23,205

Domain name
155

 
(151
)
 
4

Customer relationships
15,200

 
(3,630
)
 
11,570

Total
$
50,055

 
$
(15,276
)
 
$
34,779

Acquired intangible assets are amortized on a straight-line basis. As of July 31, 2020, the weighted-average remaining useful lives of identifiable, acquisition-related intangible assets was 3.8 years for developed technology and 3.3 years for customer relationships. Amortization expense of intangible assets was $2.1 million and $4.3 million for the three and six months ended July 31, 2020, 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, 2020, future amortization expense related to the intangible assets is as follows (in thousands):
Years Ending January 31,
 
Remainder of 2021
$
4,250

2022
8,500

2023
8,500

2024
7,825

2025
1,450

2026

Total
$
30,525


5.
Convertible Senior Notes
In June 2018, the Company issued $250.0 million aggregate principal amount of 0.75% convertible senior notes due 2024 in a private placement and, in July 2018, the Company issued an additional $50.0 million aggregate principal amount of convertible senior notes pursuant to the exercise in full of the initial purchasers’ option to purchase additional convertible senior notes (collectively, the “2024 Notes”). The 2024 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 2024 Notes will mature on June 15, 2024, unless earlier converted, redeemed or repurchased. The total

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


net proceeds from the offering, after deducting initial purchase discounts and debt issuance costs, were approximately $291.1 million.
In January 2020, the Company issued $1.0 billion aggregate principal amount of 0.25% convertible senior notes due 2026 in a private placement and, also in January 2020, the Company issued an additional $150.0 million aggregate principal amount of convertible senior notes pursuant to the exercise in full of the initial purchasers’ option to purchase additional convertible senior notes (collectively, the “2026 Notes”). The 2026 Notes are senior unsecured obligations of the Company and interest is payable semiannually in arrears on July 15 and January 15 of each year, beginning on July 15, 2020, at a rate of 0.25% per year. The 2026 Notes will mature on January 15, 2026, 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 $1.13 billion.
On January 14, 2020, in connection with the issuance of the 2026 Notes, the Company used a portion of the net proceeds to repurchase $210.0 million aggregate principal amount of the 2024 Notes (the “2024 Notes Partial Repurchase”) leaving $90.0 million aggregate principal outstanding on the 2024 Notes immediately after the exchange. The 2024 Notes Partial Repurchase were not pursuant to a redemption notice and were individually privately negotiated transactions. The 2024 Notes Partial Repurchase and issuance of the 2026 Notes were deemed to have substantially different terms due to the significant difference between the value of the conversion option immediately prior to and after the exchange, and accordingly, the 2024 Notes Partial Repurchase was accounted for as a debt extinguishment. The Company used $479.2 million of the net proceeds from the issuance of the 2026 Notes to complete the 2024 Notes Partial Repurchase, of which $175.1 million and $303.9 million were allocated to the liability and equity components of the 2024 Notes, respectively, and $0.2 million was allocated to the proportional interest paid.
Refer to Note 7, Convertible Senior Notes, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company’s 2020 Form 10-K for further information on the 2024 Notes, the 2026 Notes and the 2024 Notes Partial Repurchase.
During the three months ended July 31, 2020, the conditional conversion feature of the 2024 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, 2020 (the last trading day of the fiscal quarter) and therefore the 2024 Notes are currently convertible, in whole or in part, at the option of the holders from August 1, 2020 through October 31, 2020. Whether the 2024 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future. During the six months ended July 31, 2020, the Company converted an immaterial amount of their 2024 Notes to a certain holder, unrelated to the 2024 Notes Partial Repurchase. Since the Company has the election of repaying the 2024 Notes in cash, shares of the Company’s Class A common stock, or a combination of both, the Company continued to classify the liability component of the 2024 Notes as long-term debt on the Company’s consolidated balance sheet as of July 31, 2020.
During the three months ended July 31, 2020, the conditions allowing holders of the 2026 Notes to convert have not been met. The 2026 Notes were therefore not convertible during the three and six months ended July 31, 2020 and the liability component was classified as long-term debt on the Company’s condensed consolidated balance sheet as of July 31, 2020.
The net carrying amounts of the liability component of the 2024 Notes and 2026 Notes were as follows (in thousands):
 
July 31, 2020
 
2024 Notes
 
2026 Notes
Principal
$
90,001

 
$
1,150,000

Unamortized debt discount
(17,478
)
 
(271,701
)
Unamortized debt issuance costs
(1,408
)
 
(14,122
)
Net carrying amount
$
71,115

 
$
864,177

As of July 31, 2020, the total estimated fair values (Level 2) of the outstanding 2024 Notes and the 2026 Notes were approximately $269.8 million and $1.46 billion, respectively. The fair values were determined based on the closing trading price per $100 of the 2024 Notes and 2026 Notes as of the last day of trading for the period. The fair values of the 2024 Notes and 2026 Notes are primarily affected by the trading price of the Company’s Class A common stock and market interest rates.

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


The following table sets forth the interest expense related to the 2024 Notes and 2026 Notes (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2020
 
2019
 
2020
 
2019
 
2024 Notes
 
2026 Notes
 
2024 Notes
 
2026 Notes
 
2024 Notes
 
2026 Notes
 
2024 Notes
 
2026 Notes
Contractual interest expense
$
169

 
$
719

 
$
563

 
$

 
$
338

 
$
1,438

 
$
1,126

 
$

Amortization of debt discount
986

 
10,685

 
3,082

 

 
1,956

 
21,231

 
6,115

 

Amortization of issuance costs
68

 
455

 
195

 

 
133

 
897

 
383

 

Total
$
1,223

 
$
11,859

 
$
3,840

 
$

 
$
2,427

 
$
23,566

 
$
7,624

 
$


Capped Calls
In connection with the pricing of the 2024 Notes and 2026 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “Capped Calls”). The Capped Calls associated with the 2024 Notes 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 2024 Notes. These Capped Calls have initial cap prices of $106.90 per share, subject to certain adjustments.
The Capped Calls associated with the 2026 Notes each have an initial strike price of approximately $211.20 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Notes. These Capped Calls have initial cap prices of $296.42 per share, subject to certain adjustments.
Refer to Note 7, Convertible Senior Notes, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company’s 2020 Form 10-K for further information on the Capped Calls.
6.
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 2032. 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. The Company’s material operating lease agreements with recent lease commencement dates are described below.
February 1, 2020 was the lease commencement date for the Company’s agreement, signed in December 2019, to lease approximately 40,000 square feet of office space in Dublin, Ireland for a term of 12 years with two five-year renewal options. This agreement was determined to be an operating lease with total estimated aggregate base rent payments, excluding the renewal options, of approximately $27.0 million, based on the exchange rates as of February 1, 2020.
July 1, 2020 was the lease commencement date for the Company’s agreement, signed in October 2019, to lease an additional 21,000 square feet of office space in New York City for a term of 64 months with no renewal period. The total aggregate base rent payments for this operating lease are $8.4 million with payments beginning 4 months subsequent to the commencement date.

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


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,
 
Six Months Ended July 31,
 
2020
 
2019
 
2020
 
2019
Finance lease cost:
 
 
 
 
 
 
 
Amortization of right-of-use assets
$
994

 
$
994

 
$
1,988

 
$
1,988

Interest on lease liabilities
868

 
918

 
1,752

 
1,823

Operating lease cost
2,031

 
1,386

 
3,854

 
2,353

Short-term lease cost
740

 
308

 
1,533

 
703

Total lease cost
$
4,633

 
$
3,606

 
$
9,127

 
$
6,867


Balance Sheet Components
The balances of the Company’s finance and operating leases were recorded on the condensed consolidated balance sheet as follows (in thousands):
 
July 31, 2020
 
January 31, 2020
Finance Lease:
 
 
 
Property and equipment, net
$
37,424

 
$
39,411

Other accrued liabilities
4,765

 
4,633

Other liabilities, non-current
56,841

 
59,257

Operating Leases:
 
 
 
Operating lease right-of-use assets
$
40,481

 
$
11,147

Operating lease liabilities (current)
4,863

 
3,750

Operating lease liabilities, non-current
38,873

 
8,113


Supplemental Information
The following table presents supplemental information related to the Company’s finance and operating leases (in thousands, except weighted-average information):
 
Six Months Ended July 31,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows from finance lease
$
1,752

 
$

Operating cash flows from operating leases
2,696

 
2,083

Financing cash flows from finance lease
2,284

 

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

 
$

Operating leases
31,890

 
2,567

Weighted-average remaining lease term (in years):
 
 
 
Finance lease
9.4

 
10.4

Operating leases
8.1

 
4.7

Weighted-average discount rate:
 
 
 
Finance lease
5.6
%