Database vendor MariaDB has cut a number of jobs and reiterated a “going concern” warning over its medium-term financial viability.
In a statement to the stock market [PDF] late last month, the company, which floated on the New York Stock Exchange at the end of 2022, said it was reducing its headcount by 26 “to achieve cost reduction goals and to focus the Company on key initiatives and priorities.”
In December, CEO Michael Howard told The Register the company was looking to hire more people following $104 million in funding and $18 million through private investment in public equity through the special purpose acquisition company that enabled the flotation.
Although the job losses may be a fraction of the reported 340 people the company employs, other details in the filing may highlight further cause for concern over its financial viability.
It includes a mention of MariaDB’s February 10Q warning that the company’s current cash and cash equivalents “would not be sufficient to fund our operations, including capital expenditure requirements for at least 12 months from… February 13, 2023, raising substantial doubt about our ability to continue as a going concern.”
The March 24 statement said it anticipated that the money raised by database subscriptions and services would not be enough to meet its projected working capital and operating needs. “We are currently seeking additional capital to meet our projected working capital, operating, and debt repayment needs for periods after September 30, 2023 … Going forward, we cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business,” it says.
The timing of MariaDB’s flotation may have been unfortunate. While it was already in train, the SPAC model was going out of favor. Research from early December 2022 by investment research firm Bedrock AI found 49 per cent of the quarterly financial filings by companies floating via a SPAC since the beginning of the year contained an admission of ineffective internal controls. Earlier this month Europe’s biggest SPAC, Pegasus Europe, announced it would cease operations and return capital to its investors at the beginning of May. In May last year, Goldman Sachs took a break from handling SPAC-based IPOs.
Speaking to The Register, MariaDB CMO Franz Aman said the company was still hiring, but a number of job losses had also been necessary. “It’s absolutely no secret that, like companies in tech, we need to be super prudent, and we need to be fiscal responsive. We also had a look at our headcount plan, and we had to make sure that we were doing the right things. We had a reduction in workforce… so have most other tech companies: everyone’s concerned about profitability, cash position.”
Aman argued that a “going concern” notice in regulatory filings was far from unusual.
For example, research from Audit Analytics [PDF] showed nearly 18 percent of companies received a “going concern” audit opinion in the 2020 financial year.
“The moment auditors think there could even be the shred of opportunity that… there isn’t enough money for operation, you have to add the going concern as a risk factor. It’s a risk factor, like many others, and we’re in pretty good company there. If you look at the history of going concerns, IBM, Apple, Ford, and GM, they’ve all had a ‘going concern’ at some point in time in their company’s evolution,” he said.
The SPAC process also made such a warning more likely, because it allows investors to pull out cash without justification. As economic conditions worsened and the stock market fell last year, that’s what they did, creating a high redemption rate, which affected MariaDB too, Aman said.
Nonetheless, through its D-found funding combined with the SPAC flotation (called a de-SPAC in financial jargon) the company raised $120 million cash: “more than we had in the history of MariaDB,” Aman said.
The company was in the process of raising capital to continue operating beyond September, Aman said, but he was unable to go into detail owing to a regulator “quiet period” prior to its forthcoming quarterly results.
Meanwhile, MariaDB has appointed Conor McCarthy as CFO. “The leadership team and board’s depth of industry expertise combined with the company’s ability to execute, as demonstrated by 90 percent year-over-year growth in cloud-related subscription revenue, makes me excited for what’s possible with MariaDB,” he said in a pre-canned statement.
Only in July last year, Christine Napoli was appointed CFO, but her LinkedIn profile makes no mention of MariaDB. It says she started as CFO of MediaMath, an ad-tech firm, in November.
“Christine was there for a very short time, and she made a choice not to continue. We took our time [to find a replacement because] we wanted to make sure that we had a CFO who has a background in software-as-a-service and had CFO in a public company. With Connor checking all the boxes, he’s got what we were looking for,” Aman said.
Another potential cause for concern is the share price. Although it may not be immediately relevant to tech buyers or users, it can affect the company’s ability to raise cash, given the ability to raise capital against warrants and share options issued around the flotation.
According to its SEC filing from March 24, 2023 [PDF], MariaDB expected to secure $186.3 million cash from the exercise of warrants.
“If the market price for our Ordinary Shares is less than $11.50 per share, we believe the holders of Public Warrants and Private Placement Warrants will be unlikely to exercise such warrants. On March 23, 2023, the closing price of our Ordinary Shares on the New York Stock Exchange was $1.43 per share, as a result of which the Warrants are currently out-of-the-money,” it said at the time.
Aman admitted MariaDB was disappointed with the outcome, but he said that in January and February of 2022, when MariaDB was planning to go de-SPAC, “the world was a different place.”
The database MariaDB was developed by Michael Widenius, the main author of MySQL. Following the sale of MySQL to Sun Microsystems and then – via Oracle’s Sun acquisition – to Oracle, Widenius created a fork of MySQL which became MariaDB. He no longer sits on the board of MariaDB, the company.
“As companies grow and succeed, this personnel changes. As we went through the SPAC process, we had to design the board for a public company so the entire board got restructured, a lot of the old investors they’re not on the board anymore,” Aman said.
He said Widenius had always worked with MariaDB on a fixed-term contract and that remained the case, although he was no longer CTO. The company currently does not have a CTO but has a “field CTO”, he said.
Aman said MariaDB was making more than $50 million a year in revenue with 20 percent annual growth. Its cloud business, which includes DBaaS SkySQL, was growing at 90 percent year-on-year, he said. “We just released the new SkySQL version with cool features and a lot of savings opportunity for our customers with auto-scale not just up, but down,” he said. ®