Q1 2021 MongoDB Inc Earnings Call

Welcome to the Mongodb first quarter fiscal 2021 earnings conference call.

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I would now let's turn the conference over to Mr., Brian can you. Please go ahead.

Great. Thank you Sean good afternoon.

Joining us today to review Mongodb, its first quarter fiscal year.

21 financial results, which we announced our press release issued after the close of market today.

Joining me in the cold there, David its area, President and CEO, Mongodb, and Michael Gordon Mongodb CLL and so.

During this call we may make statements related business that are forward looking under federal securities laws.

These statements are made pursuant to the safe Harbor provisions or the private Securities Litigation Reform Act at Viking 95.

Any statements related to our financial guidance for the second fiscal quarter in full year fiscal twice what it one.

Yeah.

Back to the cold matching pandemic at market trends and our future results of operation the market position.

Yes, exactly C. <unk> C. Six six revenue timing and Atlas sales on our future results of operations.

Our market opportunity and prospects increase or market share of the global data me software market.

The opportunity here, a little bit continuing shift to the cloud the ability of our data platform strategy and our investments in R&D.

Marketing it harder to driver to say long term growth.

The worst anticipate continue estimates expects intend to well and similar expressions Arden identify forward looking statements or similar indications of future expectations.

These statements reflect our views only as of today and should not be construed as representing our views are there any subsequent date.

Did you not a plans to update you say much except as required by law.

These statements are subject to a variety of risks and uncertainty get sort of cause actual results to differ materially from expectations.

For discussion of the material risks and other important factors that could affect our actual results. Please refer to those contained in our annual report on form 10-K filed with the FCC at March 27, 2020 occurred for our current report on form 8-K filed you have to see Tonight.

Subsequent reports, we filed you have to see from time to time, including our core report on form 10-Q, two we intend to follow near term.

These documents are is about are available in Investor Relations section of our website at www Dot Mongodb Dot com.

Hi, This call will also be available there for a limited time.

Additionally.

Non-GAAP financial matters will be discussed on this conference call. Please refer to tables in our earnings release, that's your wish a portion of our website for a reconciliation of these matters. The most directly comparable GAAP financial measure.

With that I'd like to turn the call over today.

Thanks, Brian and thanks to everyone for joining us today, we have a lot to cover but before I do I would like to speak to what's happening across the United States and in many parts of the world.

I want to state unequivocally that Mongodb stand to the black community against racism violence and Hey.

We are distraught quite a spade a recent that's over another terrific incidents towards members of the black community all because the bigotry that as far too prevalent in our society.

Let me be is deeply committed to creating a culture of inclusion. This is one of our core values, where everyone no matter, what they look like where there from whom they love well what god they prey to it's treated equally.

Moving forward I will start by reviewing our first quarter results before provide some color on our employees and customers are responding to the called the 19 pandemic and how the current environment is impacting a long term view of the business.

Looking quickly at our first quarter financial results.

We generated revenue of $130.3 million, a 46% year over year increase and above the high end of our guidance.

We grew subscription revenue, 49% year over year.

Atlas revenue grew over 75% year over year, and now represent 42% of our revenue and we had another strong quarter of customer growth ended the quarter with over 18400 customers.

The living such strong Q1 results in the midst of the Cobot 19 crisis and the associated economic disruption is a testament to the testament to the resiliency of our employees the quality of our execution the appeal of our technology and our positioning in the marketplace.

While the high degree of uncertainty in the market will continue has some impact on our near term results. Our results in Q1 reinforce our conviction in the long term potential of our business.

Our first operating principle is the safety and well being over employees and customers.

We responded to early and decide to lead to adapt to the spread of Coca 19.

I couldn't be prouder of how our employees adapted and how quickly each of our teams retool dropping plans to address the constraints we're operating under.

Our developer relations team is making Johns Hopkins University scope at 19 dashboard more accessible by hosting it on Mongodb Atlas, our marketing developer relations and finance teams collaborated to launch a free outlets credits programs for all developers looking to looking to build applications to track and stop the spread of the virus so far.

We have helped launched 180 new initiatives.

Finally, covert near you Dot org supported by Mongodb employees and built on Atlas has made it easier for people to track the virus that local communities with users having reported over a million personal health updates.

From a business perspective, we quickly made a number of changes that allowed us to operate with minimal disruption.

Our sales team was inspired by the performed the teams and the earliest impact areas such as China in Italy, where we actually saw an increase in customer engagement. The team Muddier Tis rigorous pipeline generation and deal qualification process sees resulting in strong close rates despite the challenging backdrop.

Our self serve team closely monitored the online advertising market and use the decline in advertising prices to invest more in this channel while maintaining high rates of return.

Our marketing team pivoted completely from physical to online events, resulting in 12000 webinars attendees in Q1 compared to 2500 a year ago.

In addition, we turned Mongodb world our flagship user conference into an online event called Mongodb Dot lives, which will take place next week, we have been thrilled with the response and already have over 40000 people registered for the that in comparison last year. We had 2000 people attend up in person event.

Speaking of mom to be live next week, we're excited to announce a slate of new products and enhancements to existing products that are engineering teams have been working on despite the significant disruption that was caused by the work from home transition.

Finally, the rest of our teams rose the challenge in performed admirably against a difficult backdrop. For example, we seamlessly transition recruiting and onboarding to fully virtual environment, enabling us to hit our Q1 hiring plan. We also transitioned our highly regarded summer internship program to remote express and we look forward to welcome.

During our 83 interns chosen from the over 20000 applications we received.

Well, we can't predict with certainty how long or how severe the covert 19 global disruption will be.

We're seeing clear signs that the current environment, it's only accelerating the secular trends, which we are long term beneficiary.

Our customers are more determined that ever to proceed with their digital transformation efforts.

Businesses of all kinds, even the most technology cautious recognize their futures powered by software. Consequently, they need to continue to invest in their digital future. Despite the near term economic uncertainty.

During Q1, we saw customers and even some of the most negatively impacted industries double down on the digital transformation journeys.

For example, we closed a seven figure deal with one of the largest global auto companies the company's making among BB as a service available to internal use is on the private cloud that are currently more than 1000 Mongodb servers in production supporting critical use cases wasn't the various areas of the company's digitalization strategy, including the connected car.

Our initiative.

Next the volatility of the current environment. It's further underscoring the need to use platforms that enable speed and agility, our customers want to move fast to quickly see opportunities or respond to new threats. They want to easily bring you features to market and levers data effectively while being able to operate at almost unlimited scale.

Increased need for speed and agility play squarely into Mongodb score strength for example, one of the world's most popular consumer video chat applications. What's built on Mongodb technology and was able to withstand 120 ex increase and concurrent users over the weekend of March 14th.

In addition, we strongly believe that the current environment will only hasten to cloud transition covert 19 has made it abundantly clear that doing the undifferentiated work of database management does not only inefficient, but can in fact make it harder to address users ever increasing expectations.

Customers wanted de risked their operations and devote all their energy to didn't work that as high impact on the business as opposed to managing and maintaining their own infrastructure.

In Q1, we expanded our Atlas relationship with a leading north American airline their strategic focus is to accelerate their moved to the cloud in order to modernize their application to reduce their dependence on the mainframe mongodb is helping them build an operational data later in the cloud.

Finally, our customers a learning the value of a global cloud data platform that makes multi cloud easy to implement since a pandemic I started all cloud providers have seen spikes and usage that have impacted performance in availability in certain regions. In addition, cloud providers have limited certain features to avoid bottlenecks.

Given the increasing likelihood infrastructure constraints, having a data platforms such as Mongodb that makes it easy to use multiple cloud providers, it's becoming even more important.

The Canadian Security Company recently, my greatest mobile security platform from document DB Tomorrow. The Atlas in addition to reducing cost by 60% and being able to leverage all the features among to be the key objective was to create a global multi cloud foundation to rapidly scale <unk> and transactional workloads.

I'd like to spend a few minutes, serving some of the other customer wins and interesting use cases from the first quarter.

Grocery delivery wholesale a box has seen soaring demand for the goods and services due to the pandemic.

But the availability of a central supplies changing on a daily basis, they needed to highly scalable database platform to manage their supply chain in real time, they doubled down in Mali be outlets and started using mom to be charged to help with capacity planning and to ensure that could scale to meet the extreme increases and customer demand.

Bengal the leader in interactive and personalize online learning for the Belgian primary school children turned to Mongodb on March 13th to handle the increase in demand when the government shutdown all schools because the cold at 19, the company part of Sonoma learning immediately became part of the country's critical infrastructure and realize it.

He did outlets in order to scale to meet the needs of the country's children.

Then go rapidly migrate services and now sees indefinitely handled more than 12 million online exercises a day.

Forbes recently added digital asset management to its list of technology is running on Atlas. The published has been working with us or transition more of its digital footprint to mongodb known for being an innovative brand Forbes has many new products and development designed to help showcase it's journalism fueled by digital.

As it continues to lead the media industry set new traffic records and attract new audiences Forbes credits mongodb for improving its ability to serve dynamic content decreasing as total cost of ownership and make it possible to replace some of its legacy technologies.

So motto one of the largest restaurant discovery in food delivery service in the world with over 80 million monthly active users in 24 countries recently increased its commitment to mongodb to power with logistics application and essential piece of the last mile in the food delivery chain.

This helps them out of ensure that day, but they are able to keep up with increased demand efficiently map their food delivery orders to the right delivery partner track the journey and ensure on time deliveries.

French multi multinational Schneider electric which provides the energy and automation digital solutions for efficiency and sustainability recently expanded its commitment to Mongodb. The company chose mongodb to help rapidly scale, new security requirements for its new Aiotv enabled platform echo structure, which makes businesses safer more reliable and more can now.

Got it.

The company Leverages outlets to reduce Tcl and help it seems scale and managed large volumes of data more effectively.

Next group, the leading payment service provider and Scandinavia and across Europe chose Mongodb ads is accurate data platform to modernize its payment services and establish a distributed microservices architecture, but mongodb, but that's group makes it even easier and more intuitive for its customers to handle digital payments and related solutions.

Woolworths group one of the largest retailers in Australia, New Zealand decided to start offering digital receipts to its 11.7 million reward customers in order to minimize human contact during cold the 19.

The retail used the Atlas to create a new platform to ingest all of its point of sale data more than 350 transactions per second and serve it out to customers in real time mom to be was able to help them get the system up and running in under three weeks.

In summary, we are very pleased with our performance in Q1 in many ways. The world to technology has seen more than three years' worth of change the past three month, while we expect the uncertainty and volatility to continue we remain very focused on building for the long term and the large opportunity. We see ahead with that let me now turn the call.

Over the Michael to review our financial results.

Thanks, Dave as mentioned, we delivered another strong performance in the first quarter, both financially and operationally I'll begin with the detailed review of our first quarter results and then finished with our outlook for the second quarter and full fiscal year 2021.

First I'll start with our first quarter results total revenue in the quarter was $130.3 million up 46% year over year.

Decryption revenue was $124.9 million up 49% year over year and professional services revenue was $5.5 million up 1% year over year.

Help me better understand our performance in the quarter and the impact from Cowen 19 or outlook, we wanted to share some trends, we're seeing across our customer base to provide additional context.

First let's talk about new business Q1 was a strong quarter for new business and cover 19 had less of an impact on new business in Q1 than we expected.

On the direct sales side as Dave mentioned, our sales teams around the world worked effectively and responded to the new circumstances and executed well.

In particular, we had a stronger than expected quarter in terms of new business coming from enterprise advanced which helped drive revenue outperformance due to the upfront licensing revenue recognition component under assay success six.

On the self serve side, we saw meaningful increase in registrations in Q1, which translated into better than expected new customer acquisition, which you can see in our customer counts.

Well, we saw muted impact from that pandemic on new business activity. After the global locked down began in mid March we did observe a modest slowdown in the growth from our existing Atlas customers, particularly in self serve the impact was modest but broad based nearing the broader economic contraction.

As a reminder, we recognized Atlas revenues based on consumption, so slow down get impact our Q1 Atlas revenue performance to be clear, we haven't seen any increase in customer churn in either of our direct sales or self service channels.

Overall I was a strong performance continues to be the largest contributor to our gross.

It was grew over 75% in the quarter and now represent 42% of total revenue compared to 35% and the first quarter fiscal 2020, and 41% last quarter.

In addition, the dynamics in existing self service customer growth I referenced and lab as expected represented the growth headwind as we're in the final stages of transition as customers before we deprecate them left platform.

During the first quarter, we grew our customer base by over 1400 customer sequentially, bringing our total customer count over 18400, which is up from over 14200 and year ago period.

Our total customer count over 2200 or direct sales customers, which compares over 1800 in New York a period the growth in our total customer count is being driven in large part by Atlas, which had over 16800 customers at the end of the quarter covered over 12300 and year ago period.

Central growth in total customers includes growth in our customers as well as new outlets customers.

It is important to keep in mind that the growth in our outlets customer count reflects new customers to Mongodb. In addition to existing customers, adding incremental Atlas workloads.

Customer retention remains high and we've seen continued strong net expansion rate across our installed base. We had another quarter of net air expansion rate above 120%, despite the impact of the economic environment.

We ended the quarter was 780 customers would at least $100000 an error or an annualized EMR, which is up from 598 in the ergo period.

Moving down the piano I'll be discussing our results on a non-GAAP basis, unless otherwise noted.

Gross profit in the first quarter was $95.6 million, representing a gross margin of 73% compared to 74% last quarter and 70% in the ergo period.

Overall, we're pleased with our gross margin performance, which reflects greater efficiency and scaling our Atlas business. However, we continue to expect that we will see some modest reduction overall company gross margin as I was continues to be a bigger portion of our revenue.

Our operating loss was $7.4 million or negative 6% operating margin.

At first quarter compared to a negative 14% margin in the ergo period net loss in the first quarter was $7.3 million worth 13 cents share based on 57.6 million weighted average shares outstanding. This compares to a loss of 22 cents per share on 54.7 million shares outstanding in the year ago period.

Turning to the balance sheet cash flow, we ended the quarter with 977 and a half million dollars in cash cash equivalents short term investments unrestricted cash.

Operating cash flow in the first quarter was negative $5.9 million.

After taking into consideration approximately $2.6 million and capital expenditures and principal repayments of finance lease obligations free cash flow was negative $8.5 million in the quarter. This compares to positive free cash flow $2.8 million in the first quarter fiscal 2020.

I'd now like to turn to our outlook for the second quarter.

When full fiscal year 2021.

The second quarter, we expect revenue to the range of 125 million to 147 million, we expect non-GAAP loss from operations to be 24 million to $22 million and non-GAAP net loss per share to be in the range of 41 cents to 38 cents based on 58 million weighted average shares outstanding.

For the full fiscal year 2021, despite the fact that the macroeconomic outlook has materially worse than what we'd factored into our March guidance. We're pleased to raised the midpoint of our revenue guidance and tighten the range to 50 520 million to $530 million.

Also tightening our profitability Rangers and now expect non-GAAP loss from operations to be 70, $870 million and non-GAAP net loss per share to the range of $1.34 to $1.21 based on 50.1 million weighted average shares outstanding.

Let me provide some incremental color on how we see the ongoing covered 19 pandemic impacting our revenues for the rest here.

When we introduced our fiscal 21 guidance in March we shared our underlying assumptions that we would see a material business impacted the first half followed by more normalized environment in the second half the year.

Given the global development since March we clearly now expect the impact the pandemic to extend longer and impact the second half of the year more materially resulting in a greater revenue impact for the remainder of the year than we had outlined in March.

Sure some more color on how we expect this impact to manifest itself.

In March we stated that we expected a greater impact on new business activity in Q twos compared to Q1.

Q1 benefited from me deal pipeline already in place from the pandemic started we still expect that to be the case and we now expect the Q3 environment to be similar to that of Q2, followed by more modest improvement in Q4.

Furthermore, our forecast assumes that we continue experiencing the slower than historical growth from existing outlets customers for the duration of the crisis returning to historical levels thereafter.

Turning specifically to Q2, we expect a stronger than expected enterprise advanced performance in Q1 to represent a tough sequential compare given the term license revenue recorded under assay six so six.

Also keep in mind that we will feel the impact of a full quarters worth of slow growth from existing outlets customers, which impacted only a portion of the first quarter.

Let me also provide you with an update on our investment outlook.

As Dave explained we see clear signals that the current environment is only accelerating the secular trends that we're a beneficiary of.

That long term potential as well as our strong execution in this challenging environment because of continued confidence to be opportunistic on the investment front.

Through the constraints caused by the prolonged covet 19 disruption, we are naturally generating savings as travel event facility expenses or lower.

We decided to reinvest those savings into high return areas in particular, where are we seeing unique opportunities.

First as Dave mentioned online advertising rates have declined significantly in some cases as much as 30 per census dependent started this provides an excellent opportunity to increase our investment in digital marketing expense on recent strength and self serve customers new additions.

Given that our new self serve customers off relatively small revenue impact from this from this this year will be modest but to increase investment will position us well for fiscal 22 and beyond.

Second in the current environment.

We're finding there's an opportunity to incrementally add strong engineering talent that is not normally on the market and is now looking to join a well positioned and well funded company like ours. As a result, we've decided to pull forward a portion of our expected fiscal year 22, R&D hiring to take advantage of talent availability and further accelerate our ambitious product road map.

To summarize among it'd be delivered excellent first quarter results, our ability to focus and execute has served us well in a difficult environment and our Q1 performance gives us increased conviction that would be an even stronger position when economic conditions improve.

We're also confident the investments we're making today are positioning us well for continued success as we pursue or long term market opportunity.

With that we'd like to open up for questions operator.

Thank you we will now begin the question answer session.

Good question May Press Star then one on your Touchtone phone you are using a speakerphone. Please pick up your handset before pressing Mickey.

On your question has been addressed and you would like to withdraw your question. Please press Star then too.

Our first questions today will come from Sanjit Singh with Morgan Stanley. Please go ahead.

Hi, Thank you for taking the question and congrats on a strong Q1.

And it really difficult selling environment.

Dave I know you sort of outlined how you sort of think.

Well that sort of it's a forced accelerator in terms of on digital transformation in cloud adoption. When I look at Q1 results. It seems like in terms of the strength of the quarter. It was expressed do enterprise advanced versus Atlas I was wondering if you can sort of help bridge those two world on in terms of.

Customers are looking for greater flexibility greater agility, how how why was demand expressed more through enterprise advances that kind of the lowest friction wait for the existing customer base to stand up new applications today and that will change over time, you can sort of give us a sense of on.

Current demand person, how you think that the trends are going to play out for Atlas over time.

Yes. Thanks, Sanjiv, you know I just want to remind people that we don't push people towards any any particular consumption model because one of our strong value proposition is that you can run mongodb anywhere and so we still have lots of customers, even though atlas has grown so quickly have lots of customers who.

Purchase enterprise advanced and a the same phenomenon happened in Q1, where we had.

Again, you know quite a robust demand for <unk> I would say a Atlas was also very strong I mean Atlas grew 75% year over year, and so I wouldn't suggest that a you know that it was solely because of enterprise advanced and I know in previous calls people were a little worried about the growth of yea end so.

I think this puts arrest that this still robust demand for our products and some customers want to run on premise that made <unk> significant commitments to their existing internal infrastructure and and obviously lot of customers are embracing the cloud and we do believe that the long term trends or towards the cloud and one of the benefits of using Mongodb I'm now even on premises.

Is that it gives customers easy onramp to the cloud because they don't have to rewrite the application once they actually decide to move to the cloud. So that's one of the added benefits of going with mom and baby.

Got it makes total sense and the Michael just as a follow up as we think about the full year guidance any sort of mentioned Q1 benefited from a healthy pipeline coming into the quarter. As you think about the range and guy that what sort of close rates are you assuming aren't you.

You did you take down your close rates or any sort of color you can provide on conceptualizing the range of guidance in terms of the pipeline that you have going forward and potential closure rates on that pipeline that would be helpful. Thank you.

Yeah sure I'll say, a few things and I'll just aggregate into the two main channel sales sold versus you know self serve I think in sales sold.

They walk people through the impacts back in the March quarter. When you know a lot of this was emerging and we attempted to to quantify the potential impact we walk people through the scenario, where we're looking at you know Q1 impacts in Q2 impacts in terms of new business with a recovery.

And normalization in the back half of the year and that sort of flowing through the revenue model. If you will I think we saw its obviously a very strong Q1 and the team got really did a great job in terms of powering through we're still expecting to see an impact in Q2, a and that's reflected in the guidance and we're also expecting that to continue further into the year right.

So you know, we're expecting Q3 to be roughly in line with Q2.

In Q4 to be more impacted and so that's sort of under the new business activity in the signing of new business activity and then it flows its way through.

Through the revenue as you might imagine.

One of things to call out, which I think Dave mentioned on the last call a as well is I think you know.

While this has been going on for a while it's still relatively new and I think if you think about deal cycles and close rates and some of things you're describing.

I think we obviously did a very good job in terms of execution and close rates and pursuing against a pipeline of opportunities that we had to have to remember the deals that we closed in Q1 were mostly in process.

And so there is a question that we're you know that sort of factored in which is that we assume productivity takes a hit in Q2 in Q3 in part because now you're having to generate the new business on this remote environment. The teams done a great job of adapting.

We don't have a lot of data points around that on the self service side, and you know, which is all outlets and including the revenue components of sale. So that was we did mention the slower expansion that we saw from our existing customer base, great strength in adding new customers I know uptick and churn in terms of customers.

I'm going to zero.

And so but we did see slower growth. That's very much you know covert related I think if you think about I'm, having a consumption model. That's one of the things that sort of flows through right and you've got to usage based model. There's a portion of the customer bases business you know their own business has materially impacted.

And so as a result, you know we see less expansion from that existing customer base, and we're sort of assuming that that will continue.

As well so when you take those couple of factors.

In terms of the annual guide and then you also layer and the you know the I'm glad you know declines that we've talked about I think that's what sort of you know all adds up to our full year view.

Perfect. Thank you Michael that's the color I appreciate it.

And our next question will come from Brad Reback with Stifel. Please go ahead.

Great. Thanks, very much on the Atlas side could you provide maybe any color and he said it was fairly broad based but were there any specific pockets of weakness either from a customer sites and or vertical.

No. So in general as we mentioned this is.

More on the self service side.

The first place so obviously smaller customer base also saw some of it on the on the sale sold side, but not in any particular large pockets like I said no.

No no churn no uptick in churn you might think that you'd see a disproportionate number of feel a small number of customers having an outside the impact.

This is sort of more the reverse just given the broad economic contraction a number of businesses seeing underlying demand for their products, you know shrink and one of the.

You know corollaries of having an elastic business model is when there's less demand, though they'll have less usage on Atlas and that's really talked there. So I don't think there any particular.

Yeah unique insights no big customer outliers that are contributing to the slower growth.

Got it and just one quick follow up if you think about a usage trends thus far in to Q have you seen any modest uptick or they were they were for the month of April.

Yes. So we in general saw you know some initial behavior, probably mid to late March and saw that you know come down we are assuming right now from a forecast perspective.

That based on everything Weve able to certain that's related to covert 19, and so we've baked into our outlook.

That we'll see those continue.

Okay. Thank you very much.

Yes.

The next question will come from hasn't really been Goldman Sachs. Please go ahead.

Hi, This is Dan church offer Heather Bellini. Thanks for taking my question you kind of talking about this a little on it and the anywhere earmarks and I was just it's kind of piggybacking on the last question a little bit.

Lets continues to grow what kind of visibility you have when you look into the back half of the or in terms of revenue can revenue given its consumption based and then.

Any kind of.

Color you can provide in terms the how that affects billing because atlas continues to grow that percentage mix. Thank you.

Sure, Yes, so I think in general we've sent stream strong consumption of Atlas I'm, you know, Dave mentioned that you know to see 75 plus percent growth at this kind of scale is unusual and if you actually back out.

The contraction of the drag from M. lab organic Atlas more than doubled so you can see really strong performance of from Atlas overall, we see visibility, it's probably best disaggregate that in terms of the sale sold side.

As well as the self serve sign so I think on the sale sold side you typically have annual commitments that people are making.

And so that really you know the usage of course will vary but there was a contracts you've got a fair amount of visibility from a billing standpoint, what we don't guide to it I think it's important to call out that way, we mentioned us and one of the calls last year, we sort of increasingly been encouraging people.

To engage with us and engagement Atlas on a more friction free basis, and so there are plenty of customers in the sell side that are doing monthly invoicing in arrears, and so again not something that's driving meaningful deferred revenue when you're doing or sort of you know calculated billings.

Okay collections.

So that's important to understand on the self service side, its really more of a portfolio dynamic. So you know there's lots of smaller customers and so you can you know you can see a particular outlier here or there, but they tend not to moody meaningfully move the needle I think we're talking about in terms of the slower growth that we saw from existing customers is really something new.

Macroeconomically driven right. It's just it's a virtually unprecedented to have this kind of much of a macroeconomic shift and as you know when people database usage is directly correlated to the usage and Tennessee or their business and so we're seeing that which is why that's where incorporating that into the forecast going forward.

Hello, Thanks, and then just as a quick follow up.

Are you seeing any changes in the overall pricing environment or have you received money and your question it sounds from customers or extended burlington's flexible and then put anything like that would be helpful.

Yeah customers, obviously would always loved discounts, but know that that's there really hasn't been and increase there I do think we've seen some sort of like I would describe it as anecdotally interesting, but quantitatively not meaningful or material outliers in terms of payment terms, you know a one off here or there, but nothing that I would describe as sort of broad.

Based or a true trend we did some internal analysis and look at sort of you know payment terms and everything else and so we haven't seen anything meaningfully different there like I said other than sort of an anecdote here or there that's sort of interesting, but you'd have to work of but you have to really torture to kind of call. It a trend.

Great. Thank you.

The next question will come from time Iraqi with Citi. Please go ahead.

Hi, Thanks, a lot hope you're feeling well I wanted to ask you about the strong customer adds that you saw this quarter, both an atlas and overall it was there anything to call out there.

Got you know led by kind of the customer side more of a.

All or a question how are you thinking about the growth and customer adds in Atlas going forward.

Thanks, Tyler I think this is just a a function of us just being increasingly no really really focused on things like pipeline generation and being a and on the self service size being much more learning and as we're growing our business understanding what programs work and so the efficacy of a dish.

Marketing efforts is just improving over time, and so Oh and I think frankly, it's also a function of the fact that our value proposition is very strong as I said, Oh, we have a high degree of customer engagement, even with customers and highly challenged industries you know as as we've talked about you know the digital trends are accelerating.

People want to move to more modern cloud native I stocks, because software's powering almost every business and they want to use that as competitive advantage and and I'd also say the fact that our platform makes multi cloud very very easy.

Gives customers confidence that investing in and Mongodb enables them a real optionality and so so I think all the things that are just you know, giving us confidence and a long term health of our business.

Yeah, I would just also add and we said this in the prepared remarks, but just so you know people are clear.

Both the self service had customers you know start small and one of the things that we've been able to doing direct sale side as I mentioned to sort of reduce friction on what that means as people tend to come on it smaller revenue levels, but then we see great growth and expansion.

Within that lesson so.

Im not as much I wouldn't get carried away with the sort of near term you know a take away in terms of the revenue impact, but in terms of how it sets us up in fiscal 2002 and beyond.

Very good about it.

Thanks, and just a follow up Michael on your comments around that [laughter].

Some some cohort of customers and Atlas seeing slower expansions I guess.

Are you seeing.

You know dollar based dollar based churn are you seeing kind of workloads, maybe moving off that were less mission critical or is it just simply hey, maybe they were expanding at 20, 30% and now they're they're flat and then how I guess how are you how should we be so we're trying to model they said.

Would you expect this more modest growth.

That impact you kind of get full quarter that impact going forward or how should we just think about that that impact on overall Atlas gross way yeah. So I think about really in three main buckets, and it's probably clear, but just because it's important enough and we're trying to shut the insight in the color I want to make sure it's sort of clear and well understood by folks. So I think when three main buckets there.

New customers I'm coming in which continues to be strong than we saw an acceleration in that.

Theres, turning customers, meaning customers, leaving we saw no increase in that and the rest is just the expansion rate from existing customers and what we saw there is slower growth from this existing customers. So just to be Claire still growth right and so what we saw though is within some of that you see people adjusting their consumption levels based on the underlying trends in.

In their business.

And so that's really what's happening.

Thanks.

The next question will come from David Hynes with Canaccord. Please go ahead.

Hey, thanks very much.

Maybe just touch on the importance of multi cloud Optionality a a couple of times here in the call, but I want I see what you're seeing from the public cloud database or any change in competitive tactics or what you're seeing a in the field Dynamo our cosmos.

Ah frankly, we're not seeing or any real changes. Obviously, you know I think we've talked about this I'm in the past you know clearly we partner with all the major cloud providers and and Amazon and Microsoft Azure in particular have there no alternatives to mongodb, but we've not seen any.

You know any real change and the competitive dynamics I'm frankly, when we're competing we feel really really good about our position those products are clones of Mongodb and so when we expose the full feature sets and all the capabilities they'll have an mongodb and through Atlas.

It becomes a pretty easy decision to things that we worry about frankly are the deals that were not a participant and and so just as a virtue of their reach and their brand there clearly gaining business.

You know that you know, we just don't always have access to a.

That being said I'm you know Google I'm, you know as we've talked about the past.

As you know doesn't have a competitor product and departure, there's very strong they named US one of the technology partners of the year and sales teams you know do a lot of joint planning joint account planning and work in various you know in Europe, and in a and North America and other parts of the world and so.

That business is growing quickly, but frankly, our business all the cloud providers are growing quickly. So ah. So we feel quite <unk>, we feel very good about our value proposition.

Perfect.

And Michael one quick follow up for you I'm not sure. If you called it out I may have missed it but how much was that EA term license in Q1. It would just be helpful. As we think about the sequential comparisons look into the July quarter, Yes. So we didn't called and quantify the number but it was a significant increase in contributor to the throwing out performance in Q1, and this is where we've tried to call out you know pretty.

Consistently for folks when that happens just given that it introduces this increased variability and there were just comparability from period to period, but sequentially as well as year over year and as Dave mentioned, it's not something or particular trying to drive, but it's just sort of way the deals in any given quarter fall off for a pipeline perspective.

Sure. Okay, we exactly right Yeah, one thing I'd just add we did add some of the disclosure that's historically been and accuse we did pull that forward into the release to help people to see the percent of subscription revenue from enterprise advance in percent from the direct sales force just I know some people are doing some of those calculations.

And so rather than making folks weight.

We decided to incorporate that pull it up into the release and hopes that's helpful.

I did see that thank you guys.

The next question will come from Raimo Lenschow with Barclays. Please go ahead.

Hey.

He kind of go back to a to March you know you have certainly Mike you had certain planning assumptions for the year to kind of drove what you guided for and now as you kind of kind of see like okay actually maybe it's slightly longer can you talk a little bit about with like the process you have backed in terms of going for the different.

<unk> regions and thinking about close rate and took her but then what changed what's the thinking that changed compared to back in March like what's the things that makes your incrementally a little bit more nervous or what you know I'm just talk about the changes from them.

For in terms of our guidance now versus in March Yep Yep Yep.

Yeah, I think the Muslim simple way to think about it is at the time of our guidance in March I think people would not have been expecting that you know much of the working world would be you know still shut down.

And our talking about working through homes to the rest of year and all the other things that are survey on Macroeconomically. So we obviously had a great Q1 and power through that but we applied the same kind of framework or rubric, if you will.

To the new business piece.

We we looked at it region by region and I guess, maybe the most simplistic way of thinking about it. If you thought you know previously that you could you could shade ore grade a different regions a different risk levels meeting the you know and region a there would be it would be high risk in a much bigger impact in region be it would be a much smaller impact.

I think when you look at the universe today at least when we look at things Everything's on the higher high risk high impact region right and so that puts pressure you know, it's not just on a global pocket here or there, but it's really quite broad based and it's also going on for longer so you've got a bigger impact that's happening for a longer period of time and then secondly at that.

Time of the guidance in March we hadn't seen any of the slower expansion a the slower growth and the existing outlets customers and so since then we've seen that so we've updated the forecast model too and then the guidance to incorporate that as well and so you know it's just trying to give all of you the best view.

Do you know that we have on the business and I think despite that and despite the fact that sort of you know what we had quantified the impact in March it sort of 15 to 25.

Clearly the you know magnitude at the impact now for the full year is greater than that.

And despite that you know given the strong execution, we're able to raise the midpoint you know if the guide given how well we've been doing how strongly feel about you know how well our precision.

Okay challenging environment.

Yes, yes, okay Thats really helpful. That's really helpful. There may be getting extra detail, Mike Steve and then the other question is on top of self service.

Obviously like you know the different things that people would wonder now it's like if you think about is this the law of large numbers coming in and that strikes a deceleration because like you read like you could see like okay, maybe just higher churn, but you said there is not higher churn like how do you have to think about that subsurface number going forward and like I mean, clearly just to strengthen the.

In the direct business, which should be a future bets on self service.

All struggling a little bit like to how to think about that.

Yeah, I I think what I'd say is because it was so broad base and again, we sort of dissected. It in a way that I described you know you can see the new customer additions are strong and we looked and we saw we did not see an increase in customers churning and so really it's just about what is the expansion behavior, what does the growth rate of that kind of existing base.

And it was so broad based and so but modest on sort of a per.

Customer you know impact if you will but but broad based and so coincident with the global shutdown lock down that sort of started happening in mid to late March.

That you know.

The correlation is quite high and when you think about just if you're running.

If you're running a business if you've got an application and there's you know dramatically less.

You said you or your your business is taking a hit as so many businesses are the underlying impact of that is a significant enough to your business and some of that you know in a in a consumption usage based model you know starts to flow through I think importantly, based and everything we've seen you know when there's a macroeconomic recovery.

We're currently not forecasting for school 21, I would expect that you know that would recover as well again it might be a different situation, where we're seeing increases in churn or people, leaving or shutting off applications or stuff like that but that's not the that's not the behavior that we're seeing and so you know I think if you look further out from sort of a longer term duration perspective when there.

You know a recovery or a normalization there yeah I would expect will be a beneficiary of that and it would become a helpful and an additive to growth clearly you know we've had very good customer additions as you can see and the numbers and I think that's really speaks to the to the product market fit in the long term opportunity that we have.

Okay. Thanks for the car next Steve Thanks for the extra just so that was very helpful.

From.

On the next question will come from Nike, Ron with Oppenheimer. Please go ahead.

Thanks, good quarter, Michael and I want to kind of dig in on there on your view for the next quarter <unk>.

All right up potentially into it in activity in this quarter.

We're on the pipeline. He is there way for you to gauge it sounds like you're expect you know, you're clearly ending the quarter for slower or lower levels of pipeline versus last or where are you had some things outstanding budget closing the corridor is there a way.

So think about whether there was some business stuff was pulled forward from the second according to the first quarter.

Perhaps there was a little bit of them into I'll, let you else I might lose a budget. So let's go ahead and accelerate the project is there anything.

To be a to be made around that yeah. We didn't really see anything like that I mean, obviously you know in any quarter. There's some deals that you get that you didnt expect to get her deals slip or whatever and when we've seen meaningful variances. There we've tried to called that out but no. We didn't really see anything like that I think the key things to think about in terms of Q1, and maybe in particular Q2 relative to Q.

On because obviously, we're guiding down sequentially is Q1 is a really strong you know each quarter and given the term license revenue under six or six that makes it a really tough sequential compare secondly, as we said from us for March and that continues through today. We expect you know a bigger impact in Q2 from Corona virus and the challenges.

You know that we have from the overall market and then third we mentioned you know the the slower growth from existing outlets customers in Q1 will experience that for a partial quarter in Q1, and so I think that's a you know you need to think about that happening for the full quarter.

In Q2.

So I think that's really it I don't I don't I don't think about it it's necessarily you know about smaller or weaker pipelines were seeing as Dave mentioned in his remarks really strong engagement in customer activity and everything else like that so I I wouldn't think of the guide and in that context, I think about a more in terms of the factors that I just walked through.

Well, maybe then as a follow up to that and regarding these comments. If you think about E performance. This quarter briskly was very strong can you tell us if you'd was in line with your expectations was there something unusual there I'm kind of asking it also in the context of next quarter easier tried to say that pipeline around he is probably Oh my.

It's weaker relative to what pipeline in Atlas is heading into the next quarter.

Yeah, I wouldn't I wouldn't think about and I'd probably to mitigate into sort of you know pipeline, let alone sort of you know pipeline by product or channel or anything like that so I wouldn't I don't think that's like the right way to head down I think if I'm looking at Q2 guide relative to Q1 I go back to you know the things I mentioned.

In terms of the tough sequential compare given the strong year quarter, you know the big of it impacting Q2, and then you know the full quarter of the of the slower growth.

Good good luck guys.

The next question will come from Pat Walravens with JMP Securities. Please go ahead.

Thank you this is Jerry on for Pat.

First how are you guys thing about M&A at this point and then maybe back to a partnerships can you just give us an update on the Alibaba cloud partnership.

Thank you so much.

Thanks, Jeremy I'm. So in terms of a M&A, we don't have any obviously.

Specific plans to go acquire any new technology. We obviously, we'll be opportunistic you know we've made three acquisitions since I've been here you know one was the wire target acquisition in 2014. A then it was M. lab and then most recently I last year was round men and there were frankly.

Opportunistic that allowed us to kind of accelerate some products stuff that we wanted to do and kind of built more momentum and our Atlas business. We are very you know kind of focus on our organic efforts now that being said, obviously, we're not naive about the macroeconomic has deteriorated a there's lot of businesses that or no.

Maybe struggling.

And there's an opportunity to potentially acquire some assets you know that may come in the market and so it will be you know all around the context of how it kind of further accelerates our product and our product platform and so that's the context by which were looking at acquisitions and a at this point you know.

Don't see anything in the near term horizon that would you know you know that we're contemplating [noise] in terms of partnerships.

We yeah, we feel really good about the Alibaba relationship or they just give us an update I'm worried about you know past six months in terms of one that cannot relationship and I really got started from an operational point of view and they've told us that they're actually demand is higher than they expected and so a we're not factored that into.

Who any form of guidance, but we feel that the appointed their share with us as the the product market for Mongodb in China is very strong and are there, they're they're feeling really good about the customer traction that are getting so that's a.

No. That's another strong signal about our value proposition and why you know customers not Justin.

North American Europe, but also in large parts of Asia are gravitating them on <unk>.

Great. Thank you very helpful.

The next question will come from Brent Bracelin with Piper, saying. Please go ahead.

[noise] I think you're taking the question here. There is one of the you know get your view all of the database market you know, perhaps looking out beyond kind of economic shops. The business here that you're guiding to what do you think happens in a two this this industry and of course Cobrand World.

Is this just given me in certain here is this an environment, where it's just going to be harder convince enterprise the switch.

Two different vendors.

Is there an appetite.

Two such accelerate some some digital projects just as you look out kind of beyond that the short run here, what's your take on industry adoption trends kind of post Colin.

Yeah, I would I would say, it's it's not harder, it's actually becoming easier because you know what cove. It independent make us. This is basically causing every one to recognize even the most technically conservative or cautious customers that just staying on legacy technology is not a the place to be.

No what people need its ability to move quickly and they need to be able to be able to change directions quickly to as they need to build to respond to new threats or these new opportunities and and so long lead be plays right into that like give them the ability to build new features and capabilities very very fast and really gives them a very scalable durable mission critical.

Platform to build the most sophisticated applications on so so we frankly, we're seeing a lot of demand we've been running a lot of webinars and the demand and interest level is really really high as I mentioned to the prepared remarks, we have over 40000 people already registered for among would you be that live conference I encourage everyone on this call.

To try and register and trying to attend as many of the session as possible and we have some really exciting announcements plans and so we're seeing a lot of interest and again. It just comes back to the fact that you know people want to move to more modern platforms in a softer is the future for almost every business and software becomes a competitive advantage. Consequently there.

I want to build on a platform that enables them to build suffer applications quickly to build more modern applications, leveraging mobile machine learning microservices et cetera, and to do it on a platform that has a large developer community and momentum around and so given all those things I'm you know we feel really good now we do right.

Hi, guys that are you now see the current macro environments not great, but our long term view on the business is a very bullish.

Got it sounds like the engagement around you know that they had the opportunity is certainly accelerating the risk. It sounds like is more just on around timing of when that that opportunity converts to revenue because of all the economics at the right where they kind of frame.

The the increase engagement, but increasing uncertainty around the timing when that converts to revenue is that the best way to frame at one.

Oh, <unk> I would say, maybe starting with a small than planned and then grow overtime and we'd much rather engaging the customer sooner then wait for some bigger deal and so the more we condition customers to use mongodb earlier and for for more of their applications. The more that's kind of you know allows us to build.

A more meaningful kind of relationship with those customers and we become the defacto standard and those accounts and so that's that's all long term goodness and so when we see you know new customer acquisitions really strong when we see.

Yeah, you know the level of interest and demand for among the B to B strongly we see that level of attendees to work in a webinars and conferences in our large user conference to be really strong. You know. These are all signs are you know really great signs for us for the future.

Very helpful color, that's only had thank you.

Thank you.

No were next question will come from Jack Andrew with Needham. Please go ahead.

Oh, good afternoon, and congratulation on the results I want to see if you could just update us on terms of where things stand with some of your systems integration partnerships could you update us in terms of where the momentum is whose whose ramping up mongodb practices. These days and how that's impacting your business.

Yeah actually I was on the phone, what's likely to zoom zoom call with a one of the most senior executive one of the largest systems integrators in the world a two days ago. You know so the interest level continues to be very very high and so we're seeing you know you know we're seeing actually one another obscene exam.

From not large systems integrator. It was asking me you know how could he acquire more mongodb skills more quickly because they're seeing so much demand and and yet we recognize that obviously you know sides have lot of people and they want access to a you know they want access to tap.

And and so and people are really understand these new platforms and these new architectures and so forth and so while the retooling a their existing you know organization. They're also looking for new skill sets. The other thing that I would also add is we have Frank the Souza, who is the former founder and CEO of cognizant onboard so he's though.

Well, it's great to hear just as a follow up question. Then you mentioned that you are planning on pulling forward. Some of your plans fiscal 22 R&D hiring are there any comments you can make in terms of how you're thinking about sales and marketing hiring in this environment.

And marketing side, what you know, we talked about and Michael mentioned in his remarks is that you know and actually I also mentioned is that yeah. We're seeing obviously, some very attractive rates from an online advertising and digital marketing area, So where frankly, leveraging those low rates to do do more because we've seen such high rates.

Turn and so we think that that makes a lot of sense and so obviously as a self serve business continues to grow you know we feel like those investments make a lot of sense and so on the sell side. We've already you know you had a pretty ambitious hiring plan and a <unk> a lot of it.

I will depend on US you know seeing you now see how results go and of.

We typically make investments from a success based point of view, so, though where teams are having a lot of sex we've planned more resources than and a if you feel that things are going a little slower than planned we'll try and figure out what's going on but in general we've been really pleased with.

How our sales team did especially given our Q1 results and we I have a lot of frankly, a lot of confidence in our Salesforce I believe our Salesforce is one of the best of the business and and we wouldn't be building. These results without without the strong cell source that we have.

Great. Thanks for taking my questions.

This will conclude today's question and answer session I would now like to turn the conference over to David its area for any closing remarks.

Well I want to thank everyone for joining today I'm. Obviously this is a crazy environment, but you know I want to rewrite among DBS commitment to a culture of inclusion. This is something that's one of a core values and we're very committed to making sure that people have all walks of life are treated equally I also.

Oh I want to just acknowledge that obviously, we still dealing with Pandemics I wish all of you.

All the best then to stay safe and healthy with that thank you for a time and we look forward to spin too soon take care Bye bye.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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