Q2 2021 MongoDB Inc Earnings Call

The real after today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the conference over to Brian Denyeau, What I see our please go ahead Sir.

Great. Thank you Chuck good afternoon. Thank you for joining us nature of your Mongodb second quarter fiscal year 2021 financial results, which we announced in our press release issued after the close of market today.

During the call today or David its area, President and CEO Mark Good evening.

Gordon Mongodb COO and CFO.

During this call will make forward looking statements, including statements related to our market opportunity and future growth our financial guidance.

You bet it impacted the carbon 19 pandemic, our business and the results of operations.

These statements are subject to a variety of risks and uncertainties that cause actual results could differ materially from our expectations.

A discussion about your restaurant.

It affect our actual results.

Later for the rest described as a C filings, including our most recent annual report on form 10-K, and quarterly report on form 10-Q.

Any forward looking statements made in the call reflect our views only as of today, we undertake no obligation to update.

Additionally, nongaap financial measures will be discussing the conference call.

<unk> for the tables in the earnings release on the Investor Relations portion of our web site for a reconciliation of these matters most directly comparable GAAP financial measure.

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

Thank you, Brian and thank you to everyone for joining us today I will start by reviewing our second quarter results before giving you a product and go to market update.

Looking quickly at our second quarter financial result, we generated revenue of 138.3 million or 39% year over year increase an above the high end of our guidance.

We grew subscription revenue, 41% year over year.

This revenue grew 66% year over year and now represents 44% revenue.

And we had another strong quarter customer growth and any of the quarter with over 20200 customers.

These would be strong results in any environment, but up particularly notable during a global health and economic crisis, I'm, especially proud of her employees across all facets of the business have adapted to working in a remote environment.

Execute at high level their passion and commitment to our customers under the business in this difficult time have been outstanding.

Over the past five years, we have conducted detailed employee engagement survey semiannually do understand how employees feel about the company tellingly and our most recent survey conducted this past July the scores and employee engagement and all the confidence of the company's future prospects were the highest ever recorded.

Every business is quickly, becoming a soccer business, which means the value proposition of any business is increasingly enabled delivered or defined by software.

Consequently accumulated a productivity of our business becomes a developer as developers create enhance applications that lead to a competitive advantage.

Since our inception 13 years ago [noise].

We put the develop at the center of our universe, and we introduced a new class of database based on the document model or Jason Jason is a data format, that's easy for developers to read and write and machines to parse. We've always believed that Jason is the best way to work with data.

As tech savvy companies around the world adopted the document model. The industry took note first Microsoft then eight yes, and most recently Oracle tried to emulate what we have done.

Oracle recently made public statements that acknowledge that Jason has become the main data model for new applications and that developers loved Jason because it provides support for dynamic scheme as consequently, making it easy to make changes.

I believe it's noteworthy that industry not agrees with our fundamental premise the dock than modeled it simply the best way to work with data.

Our mission continues to make it stunningly easy for software developers to work with data wherever it resides to drive innovation and create value.

Mongodb life, our user conference held in June we made significant product announcements several significant product announcement that further advance our mission.

With the introduction of money before for.

We delivered a number of additional feature enhancements that push the envelope of what it means to be a modern database, but new capabilities are not create language layered on the most flexible distributed systems architecture anywhere developers can build the most sophisticated transactional and analytical applications securely at scale.

Mongodb outlets data Lake is now generally available allows teams to query and analyze the structured and unstructured data and the three buckets using the Mongodb Curry language.

Outlets data Lake also supports Federated queries, which means teams can submit a single query and analyze operational data an atlas alongside the data in a three.

We announced the beta of Atlas online archive, which completely changes the economics of large datasets, but allowing users to define rules that automatically archived there from the Atlas database to low cost cloud object storage.

Basketball customers retained the ability to seamlessly query, they're all kinds of data with no extra effort.

The general availability of Atlas search allows developers to deliver rich search experiences on top of their data in the cloud without needing to deploy learn and manage a separate search technology.

Atlas search uses the Mongodb Cree language and is fully managed and finally, we unveiled mongodb around it combines the popular rail mobile database, we acquired last year and the surplus data access did a movement and did it manipulation services, formerly known as money be stitch.

Our core component of Mongodb realm, as realms thing, which is available in public beta.

Edge to cloud data synchronization service between realm mobile data based on the front end and Mongodb Atlas on the back end Salt is one of the most challenging did a problems for mobile developers.

Our recent product announcements enable customers to use mongodb for a broad set of use cases and represent a significant significant step forward on our journey to deliver the pre eminent modern data platform for the developer.

Our second [noise] strong second quarter results reflect the fact that our go to market organization executed exceptionally well under challenging circumstances.

It does in difficult times when World class go to market organizations separate themselves from the mediocre ones and we are proud of our team and our sophisticated approach to growing our business.

Our second quarter results also demonstrate the increasing efficiency of our go to market efforts as we're driving increased synergy across our four sales channels I feel salesforce the inside sales team, our self service channel and our partner organization.

Starting with the self serve channel we're over the past two years, we assembled a strong growth marketing team built our processes and the infrastructure skill or self service business and implemented a way to rapidly experiment a launch programs to increase the size and quality of our pipeline.

We're pleased by the traction we're seeing particularly in terms of acquiring new outlets customers, which have achieved a third consecutive quarter record growth.

That's our sophistication managing the Celso business grows we're finding ways to accelerate the growth of the overall Atlas business. We do this by identifying self serve customers based on product usage signals that benefit from direct engagement with our sales organization.

With more attention service and support we see a significant acceleration and customer spend.

As we had become better at identifying to self service customers with high growth prospects. It has given our sales teams are more efficient way to prospect of self service customer base.

The end result is a self serve child to generate significant value on multiple levels. That's an important revenue generator and its own right and that's a source of excellent leads for inside and field sales teams.

Turning to our insights and field sales teams over the past year. We've also gain conviction that new outlets customers irrespective of their size when given proper resources and support at the outset grow rapidly. This is true not only for customers are transition from self serve but also for customers launching brand new applications on Atlas we're migrating.

The self managed instances of can mean server onto our platform.

As a result, we've adjusted our approach to increase the velocity of acquiring new customers. This year prior to the outbreak of Coven 19, we changed incentives or sales team to focus more on landing new customers onto a platform and less on the initial size of on sides of the initial commitment.

Moreover, we are using our professional services organization strategically to set of customers. The success early to get them more confidence and using mongodb.

The result is a third consecutive quarter of record customer growth.

With notable strength in our inside sales channel.

Lastly, the partner organization to sourcing are influencing a growing percentage of our business, especially with cloud providers. We've seen strong momentum on deal activity with all three major cloud providers and each cloud providers, providing more marketing dollars, adding more incentives for their sales people to work closely with mongodb and dedicating more headcount to better support and grow the partner.

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Given the fundamental advantages of the dock when modeling the breadth of our product offering customers recognize among <unk> the clear choice for the digital transformation plans the combination of our leading modern data platform and our sophisticated go to market efforts allow us to deliver consistently strong performance.

No I'd like to spend a few minutes reviewing some of the customer wins, an interesting use cases from the second quarter.

One of the world's largest telecommunications providers is currently developing them next generation location services that can pinpoint mobile locations, but sensor meter level accuracy their need for a flexible data model with rich indexing and trends political capabilities and a data platform that can scale quickly let them to choose Atlas this quarter.

Their group the world's third largest holding company in consumer goods for do it yourself and decoration within International network, a 14 brands across 13 countries moved to Atlas in order to standardize App development, among the developers and accelerate time to market as ecommerce demands grew drink over 19.

Agero alito into Digitization of driver assistance services, serving more than two thirds of insurance companies. The U.S. chose Mongodb tell power. Its next generation of software enabled driver safety services and technology.

Mongodb Atlas has allowed them to move from one monolithic application to Microservices and provided better digital experience for the 115 million drivers they protect each year.

Hi spot the sales enablement platform that makes every conversation count helps customers worldwide empower the remote sales efforts, which is now more crucial than ever because of coven 19.

They recently standardize among it'd be outlets to drive strategic growth and improved customer satisfaction.

Symphony the cloud messaging and collaboration platform for the financial services industry chose mongodb outlets to support the evolution of the architecture and foster efficiencies outlets, one will allow them to do your to crucial security policies and probably the best and most reliable experience to the customers that scale.

Lastly, one of the world's largest cloud providers has built a security solution. Among the B that provides rich visibility control over data traffic and sophisticated analytics to identify and combat cyber threats across their cloud services.

This cloud providers increased its commitment to mongodb, making us the primary technology for handling immense workloads and highly flexible yet secure environment.

In summary, we're very pleased with the performance in Q2, while the macroeconomic environment remains challenging we are executing well and remain focused on the enormous opportunity that lies ahead.

We continue investing to capture this opportunity and in particular recruiting world class talent to help us maximize our potential.

To that end in the past weeks, we welcome several important additions to our senior management team.

Mark quarter joined Us as our Chief Technology Officer in July most recently seats, you have core technologies and transport to grab markets. A 30 year veteran of the database industry. He was an early member of the Oracle database Curled group and later, what's the general manager of the ADW. This Rds business.

Mark originally joined Mongodb as a board member earlier this year, but he got excited about the opt in front of Mongodb and wanted to be directly involved very few people understand the relational database technology and its limitations better than Mark. So we're excited about we're excited that he voted with its feet and joined the world's most popular modern database company in a senior leadership role.

No.

In early August we welcomed Harsha Jolly Hall, as our new Chief people officer harsh as a season HR executives that's been the forefront of scaling large tech companies as well as managing complex enterprises. Most recently Harsha was the vice president of HR Unilever and it was responsible for delivering into an HR strategy and operations the U.S. business prior.

To that she wasn't HR executives cognizant during its hyper growth phase.

Finally in mid August Rishi job joined Us as Chief Marketing Officer re she's a veteran technology marketing executive with more than two decades of experience. Most recently advantage, where he was the company's chief marketing officer.

Prior to that re she was CMO Dun <unk> Bradstreet cloud data and analytics provider and earlier had a senior leadership role driving delves digital marketing strategy.

Harsher Mark and re she joined a talented and dedicated senior management team that was performing at a high level as our Q2 results clearly demonstrate we're excited for what we can all accomplished together. That's we continued disrupting one of the largest markets in software.

With that I'll turn it over now to Michael.

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

First I'll start with our second quarter results total revenue in the quarter with $138.3 million up 39% year over year subscription revenue was $132.5 million, 41% year over year and professional services revenue was $5.8 billion up 11% year over year.

But our performance in the quarter into perspective, we thought it would be helpful to provide an update on how could 19 has impacted the growth of our business.

First let's talk about new business the negative impact of covered 19 on new business in Q2 was less than we had expected as Dave explained our various go to market teams had executed well in the first fully remote quarter since dependent extorted.

Second in Q1, we noted that we observed a slowdown in the growth in spending from our existing Atlas customers.

Particularly in the self serve channel.

In mid Q2 at the economies around the world started the gradual process of reopening we saw an improvement and the rate of growth of our existing Atlas customers well the trends still remains below historic levels. The improvement we experienced in Q2 increases our confidence that the slower than historical growth is simply a macro phenomenon.

Overall outlets. This strong performance continued to be the biggest contributor to our growth.

Let's go over 66% in a quarter and now represent 44% of total revenue compared to 37% in the second quarter fiscal 2020, and 42% last quarter.

During the second quarter, we grew our customer base by over 1800 customer sequentially, bringing our total customer account over 20200, which is up from over 15000 in the year ago period.

Our total customer account over 2500 or direct sales customers, which compares to over 1850 in the ergo period.

The growth in our total customer account is being driven in large part by us which had over 18800 customers at the ended the quarter compared to over 13200 into your go period.

Important to keep in mind that the growth at our Atlas customer account reflects new customers department to be in addition to existing customers, adding incremental Atlas workloads.

We do another quarter with our net air expansion rate above 120% dislike the impact of the macroeconomic environment.

We ended the quarter with 118 customers at least $100000 an air our annualized EMR, which is up from 622 and a year ago period.

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

Gross profit in the second quarter was $99.7 million, representing a gross margin of 72% compared to 73% last quarter and 72% in a year ago period.

Overall, we're pleased with our gross margin performance, which reflects greater efficiency and scale in our Atlas business.

However, we continue to expect it we'll see some modest reduction and overall company gross margin as Atlas continues to be a bigger portion of our revenue.

Our operating loss was $10.2 million or a negative 7% operating margin for the second quarter compared to a negative 15% margin in a year ago period, our outperformance versus our operating loss guidance was in part driven by revenue outperformance, but also by the timing of certain expenses that we now expect to incur in the second half of here.

Net loss in the second quarter was $12.7 million were 22 cents per share based on 58.4 million weighted average shares outstanding. This compares to a loss of 26 cents per share and 55.6 million shares outstanding in the Ergo period.

Turning to the balance sheet and cash flow.

We ended the quarter with $975.4 million in cash cash equivalents short term investments and restricted cash.

Operating cash flow in the second quarter was negative $10 million.

After taking into consideration approximately $5 million in capital expenditures and principal repayments of financially leasable liabilities free cash flow was negative $15 million in the quarter.

Comparison negative free cash flow of $13.8 million in the second quarter fiscal 2020.

I'd like to turn now to our outlook for the third quarter and full fiscal year 2021.

Third quarter, we expect revenue to be in the range of 137 million to 139 million, we expect non-GAAP loss from operations to be $27 million to $25 million and non-GAAP net loss per share two in the range of 48 cents to 45 cents based on 59.1 million weighted average shares outstanding.

For the full fiscal year 2021, we're increasing our revenue guidance to 549 million to 554 million, we're improving our profitability expectations and now expect non-GAAP loss from operations to be 71 to 66 million and non-GAAP net loss per share to any range of $1.29 to $1.21 based on 58.7.

Million weighted average shares outstanding.

Let me provide some incremental color on how we're seeing the ongoing cover 19 pandemic impacting our outlook for the rest of year.

As we did in our Q4 and Q1 calls let me start off by updating you on our underlying view on the business environment, that's driving our guidance.

In March we expected driven 19, Devon material impact only in the first half a year.

June we understood the impact would extend into the second half of fiscal 20 Watt at this point, we clearly believe that impact dependent or will extend it at least through the under this fiscal year.

Starting with new business, our strong Q2 results notwithstanding we do expect to see an impact on new business in the second half the year well customer engagement continues to be high we expect macro uncertainty to be a factor.

Furthermore, our forecast assumes we're continuing experiencing slower than historic growth from our existing outlets customers consistent with our results in Q2.

Finally, as you'll recall, our fourth quarter last year was a particularly strong quarter for enterprise to advance product.

Enterprise advance has an immediate impact on revenue due to the fact that under assay 660 recognize the term license component upfront.

Dynamic makes Q4 in particular, a cup a tough compare for us.

To summarize mom to be delivered excellent second quarter results, we're executing well on our product and go to market strategies, which is generating strong growth at scale. We've arc, we believe our clear leadership as the modern data platform of choice will enable us to continue delivering strong growth going forward.

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

Thank you we will now begin the question and answer session to ask a question. You mean press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too we ask that you. Please limit yourself to one question and one and one follow up till now everyone to.

Good question at this time, we'll pause momentarily to assemble roster.

And our first question will come from Keith Keith Weiss with Morgan Stanley. Please go ahead.

Excellent. Thank you guys for taking the question Andy Congratulations on the very impressive quarter.

Very impressive in in terms of I mean, the momentum that you guys are keeping up is on both sort of the topline in terms of that the nice growth that you saw there as well as operationally in terms of those hires that you guys are able to get it both very impressive.

One of the numbers in particular that I wanted to ask you about they're really popped out the news the number of new customer additions that we saw in the corridor.

It looks like over 800, new customers and that's frankly to the biggest number that I had on my my spreadsheet here have you guys ever historically, adding and what is admittedly a very difficult like you spending environment. So so Dave for you is there any change in kind of like go to market or sort of a better motion like you're talking about and self service.

What's driving that strengthened sorted that that debt upward momentum that we're seeing in the new customer ads.

Yeah. Thanks, Keith we're obviously very pleased with the customer additions for for the quarter I would tell you that we made some changes to sales incentives at the big into your prior to the outbreak of Coven 19, where we made a conscious decision that we just wanted to accelerate the acquisition of new customers This year and we.

Decided that because we saw how customers grew really really quickly once they got into our platform and in particular on outlet.

Because we saw that growth happened, we said gosh, why we just focus more on acquiring new customers and they naturally will grow more and so before we would force Fortunately the strong word when we would incentivize our salespeople to get upfront commitments and for many customers you know they're not completely sure.

One of the platform to how quickly their workloads would grow how much data they'll have how many uses the hub. So it ends up being a bit of a adding a little bit more friction to the sales process. Because you have to naturally <unk>. They had done actually trying to convince the customer to make some form of commitment because we took that objection away. We've just seen in a real frankly.

It's unleashed the productivity or salespeople, it's come down the cycle time of some deals because avoiding that negotiation allows them to get on the platform more quickly and allows us both on the direct side and even on the self service I'd just add a lot more new customers.

[laughter] God that then next kind of sense and then Mike a question for you and this is related to the guidance.

The implied.

Like Q4, Guy if we take the full year and we subtract out the Q3 looks for a pretty sharp slowdown in overall revenue growth I just wanted to show it sounds like a lot of that it's kind of like the tough comp that you have from from strong Yi Ay a year ago period is there a also saw an aspect of mix shift in terms of the mixed the expected to be so much more subscription.

But it's sort of the new business coming to the Atlas versus that Ian that also he kind of impacting that did year on year growth dynamic for total revenues as we get into Q4.

Yes, Thanks depression keep so overall I think we have a very healthy outlook. Despite a challenging macroeconomic backdrop, but as we've indicated we certainly expect to continue to see or to see some impact on new business I'm in the macroeconomic environment. We're also expecting to continue to see the Atlas consumption expansion.

At lower levels of than we've had historically are consistent with Q2 and obviously as you go later in the year that also compounds in the last factor, which you did call out is the tough compare we called out last year in the Q4 that it was a particularly strong quarter for enterprise advance and actually even in that quarterly call. We talked about one large multiyear.

Your customer that represented about three and a half million dollars just from that one customer of Q4 last year and so just for those you know following the bouncing ball not only do you lose that from the denominator or do you think that a dominant it but you also don't get the benefit of that and this year in the numerator, but overall I think we you know.

Are liking the dialogues that we're seeing goes an incredible relevance, but there is you know macroeconomic uncertainty in the back half here.

[laughter] got it.

As you are much guys.

Thanks Keith.

Our next question will come from Brent Bracelin, what the Piper Sandler. Please go ahead.

Thank you once a day even offer on for Michael Dave I wanted to drill down on the the record number of new customers as well and maybe pick out a slightly different a spin here on one hand I certainly appreciate the self service kind of investments and focus there over the last year that you've made that's clearly having.

An impact it sounds like there's some incentives, but the salesforce. It seems your resonating and lowering some some ah somebody some adoption kinda barriers as well, but it is very are also an industry shift my real question. Here is is the product resonating in this current environment kind of post Covidien and ways you did.

Necessarily expect or would you say most of the performance. This quarter was all kind of internal.

Execution, just parse how much of the industry's changing and the appetite for from August changing versus kind of just just internal execution, which again was very strong.

Well thanks for the question Brent I would say, it's a bit of both I would say that in general what we're seeing as customers are really driving gravitating to modern technology stack that allows them to be very nimble move quickly innovate fast and so obviously I'm only be place that strength.

Second that they do want to focus on on work that adds value to the business and basically outsource all the undifferentiated work. So managing a database is not exactly going to give them a competitive advantage and third given our platform offers them a lot of choice with with offerings to allow them to run their workloads across the three different providers that gives them also work.

Confidence in terms of you know I'm betting on outlets. So I think that's that's one clear dimension.

And then we have actually I think you know as I as I said the opening remarks, you know we put a lot of focus on our go to market efforts in fact upsets much thought enough, where we put into a product. We do the same on our go to market efforts and so what I think you're seeing is just strong execution on across our four channels.

And and as I indicated that last question. We have slightly modified. This is just a tweak is not a major modification flight modified some of the incentives to really make it easy for customers to engage with us and get on the platform quickly and that's really yielded the results that we've seen.

Sure It certainly sounds working there and working well and current environment I guess, what Michael here just for you as a follow up.

Talked about kind of their confidence in the second half and gave a little more color on the tough compare yeah, but as you can think about the pipeline would you say the pipeline of new business looking out in the second half is also slightly kinda depressed or are you assuming just a lower close assumption in the second half pipeline given.

All of the uncertainty out there just trying to parse out how much of your your commentary on the business being impacted in the second half is tied to pipeline or just assumed to close rates being lower given all the uncertainty out there.

Yeah sure don't totally understood I know, we feel very good about the engagement that we're seeing with customers, but I think in the face of the macroeconomic environment. It makes sense to you know factor that in a we've got one quarter under our belt fully remotely and I think we feel really well about how the team has done a but the situation.

You know with cover 19, and the overall kind of quote Nick coordinated global slowdowns and openings and all things is unprecedented so I'm incredibly proud of how people you know have adopted but this is not a a playbook, where you sort of set it you've nailed it and then you forget it there's a lot operationally to focus on so very proud of what the team does but and how that we've done but.

I think when you look out at the second half of the year. It it's hard not to assume that the macro won't have an impact.

Very clear thank you.

[laughter]. The next question will come from Raimo Lynch child with Barclays. Please go ahead, Hey, Congrats from me as well two quick questions. One for the the if you look at you know like if you kind of starts working with larger customers. There's obviously you like.

Application and usually you kind of sits there and then you at the moment databases to one that kind of kind of powers that then and what do you see in terms of People's interest. There's a lot of talk about digital transformation, but in with coal would you have like industries that obviously, you're not doing so well like what do you see in terms of light then that's kind of interest to kind of to me.

First off or utilization, we need to do more stuff and then they don't then and the fact like engaging with you on that I would assume that's kind of a multi quarter story you that it should be starting to unfold, but I'm. Just wondering if you see some of that already and then had a follow up for Mike.

Yeah. There's no question that covert 19 has done is forced every customer no matter, how traditional or critical legacy there were to be digital by default, so whether youre us a traditional retail or you have to quickly build out your ecommerce channel if you're in different type of business you have to figure out a way to engage with your customers in a digital you know kind of format.

And approach and so that obviously plays to our strength one customers can innovate and build very very quickly and long DB. They can also scale. It you know very well compared to all the other legacy platforms.

Two outlets becomes very attractive because we take care of all the management of the database and the underlying.

Infrastructure, so that makes it very attractive for allowing to the customer to really focus on what's important to them and then as I said multi cloud plays a big roll depending on what the customers trying to do what Joe coverage they need what existing relationship they have with what certain cloud providers et cetera. They have ultimate choice in terms of you know who the.

What underlying cloud provider used with Atlas. So all those three things play in our favor and I think what cobot has done is really accelerated you know long term trends, we always very bullish about the future, but the long term trends are clearly accelerating and and we're trying to capitalize on it.

Okay perfect that makes total sense and then one for Mike.

I hear you own the Q4 situation, but if I look at your Q free garden style to kind of looks for kind of flat quarter on quarter, which is something we haven't seen is there anything in the queue free on the comes to Tetra or you eat it you wanted to point out.

No I I think in Q3, they they the key thing is we've got a very healthy outlook and strong customer engagement, just but just a lot of macro uncertainty that we've incorporated into the forecast which has been consistent with.

Our general approach each quarter as to sort of you know mark the current state of the macroeconomic landscape as best we can to market and incorporate that into our thought process, but from an overall engagement from <unk> perspective quite strong.

And you know, we expect to see an impact on new business that obviously, particularly with the enterprise advanced product has impacts.

In terms of a you know revenue from term license revenue and you know we're assuming that Atlas is still expanding you know at below historic levels consistent with Q2.

Okay perfect. Thank you congrats.

Our next question will come from Heather Bellini with Goldman Sachs. Please go ahead.

Thanks, guys for for taking the question I'm, just kind of a couple of quick one in regards to your comment about Atlas and the consumption, you're starting to see existing customer consumption start to come back is there a sense you could give us for how far off you think it is from from where are you.

Okay, you know and and how long you think that takes to come back I know that's a tough question.

Given the macro environment. It I'll start with that one and then I just had a follow up.

Sure Yeah. Thanks, Heather I would go back to our commentary on the Q1 call, where we talked about it being some modest but broad based on tracking you know the macro economy overall, where it was sort of cross region cross sector.

You know et cetera, et cetera, and that what we said is in Q2 in the middle of Q2, we saw a rebound or an improvement in.

In those lower levels that clearly you know at least to us when you look at all the data only slice and dice. It indicates that it's tied to overall economic conditions, it's not quite get back to historic levels at it would be very hard for me to to predict when or how that would happen, but I think the the correlations that we've clearly seen as it's broadly type.

Due to macroeconomic behavior, which would make sense given both the broad based nature.

Of the behavior, but also the broad based nature of the fact that it's a database application and it's a consumption revenue model and so all those things should mirror each other and that's you know what we're saying Oh.

Okay and then the follow up question would be just wondering problem. If your customers still might be asking for if you're seeing you know kind of requests for payment extension or anything like that or or.

Doing anything anything else creative on I'm kind of top automobile that might be helping down the line. So I guess it to other one sorry yep none of the fund. So we saw I'm, a very limited and isolated instances of that in Q1, but that has effectively you know worked its way.

Way through taking care of itself those folks of upcoming cleared and the you know frequency of requests or anything like that as really dried up. So we saw a little bit it right as the crisis was first sort of you know setting in but it's not been a regular recurring sort of business consideration that we've had to do it.

Okay, great. Thank you so much.

[laughter]. The next question will come from Brad Reback with Stifel. Please go ahead.

Great. Thanks very much.

Dave as you think about the evolution of the go to market and the acceleration and smaller Atlas customers upfront.

Coupled with a much broader product portfolio is there any reason to think that your net dollar expansion rate should accelerate in coming years.

Yeah.

So I think just do I make clear.

Why we doing that you know we have seen Atlas customers grow very very quickly and one of the reasons, we want to get them on the platform. It's really condition them. So that you know they they don't begin to think about even managing the next not by themselves once they could get conditioned on building every new app on on Atlas that becomes almost the standard way of people.

Building and deploying application. So there's a long term effect of that you know it's hard for me to sit here in terms of what the implications would be on the net expansion rate. They've also been very healthy and we don't see any potential change that.

Great. Thanks very much.

Thank you.

The next question will come from Jason Adder with William Blair. Please go ahead.

Yeah. Thank you.

Dave when you look at the database market <unk>, we're still seeing good traction for relational products and I'm thinking of like Maria DB in particular, where do you think that traction is coming from especially as the document model seems to be gaining significant share.

Yeah, what I would say is there's really two phenomenon says what I call I'm, a phenomenon of lift and shift where customers just want to get off the legacy vendor in most cases that someone like Oracle, where they don't want to pay the Oracle tax anymore and and go to open source.

Relational database and that's what many people called the lift and shift phenomenon. Many customers naive. We believe that that will you know allow them to you know just keep running their business the what they miss those that they miss the opportunity to re factor that application and really modernize its to position themselves to really take advantage.

Edges take advantage of all the new capabilities of a distributed platform and take advantage of other things like Microservices and so forth and so we have many customers who decide you know what rather than just lifting and shifting be want to re platform and basically choose mongodb as the as the solution the the destinations.

Solution. So it really depends on on what how quickly the customers want to move their perceptions of how difficult is to move off you know there say oracle to a distributed database like Mongodb how enabled they are worse and also how much time pressure there and.

So that's why we're expanding our reach working with a systems integrators I'm working with our partners and obviously own salesforce to get out there really explain the benefits among BB and the fact that you know whatever perceptions. They have a we can address to make make the choice of making mongodb that much more easy.

Do you think the current environment will change those dynamics at all in terms of those phenomenon in other words, maybe move people faster to the or their modernization of replatforming.

Well well I think you know the you know when when we first came out a lot of people view. This as an interesting, but nichey solution, maybe just use for certain set of use cases, I think we've clearly shown that mongodb conserve the most demanding customers anywhere in the world for for a wide variety of use cases, and that's only increasing so I think.

People are recognizing and as I mentioned, you know all the major players today have had to acknowledge that Jason is the format and the an end to end up a structure that developers like to use that the docking model is truly the best way to work with data and the added benefits of our distributor capabilities. It's so easy to scale out using a distributed platform like.

Going to be then say staying on relational platform and having to do a lot of gymnastics to get the application to scale and so I think it does take time, but you know we've clearly seen you know customers recognize and and and use us for very very sophisticated applications.

Thank you.

Thank you Jason.

Again, if you have a question. Please press Star then one our next question will come from Tyler Radke with Citi. Please go ahead.

Hey, Thanks, and good evening, Mike and Dave.

Michael I just wanted to start with you in trying to understand.

The accelerating customer adds here and it and it sounds like you did make some tweaks to the sales incentives to prioritize adding new customers, but I wanted to just kind of better understand the the financial impacts here. I mean are they are you landing customers new customers that at a lower ASP.

And then hoping you know that those expands or our higher down the road, maybe just help me understand that and then you know how we should think about just kind of the accelerating new customer adds translating into.

Higher higher revenue growth or just how to think through the financial impact to that.

Sure Yeah, no. There are there a couple different factors, a and flavors of it you can slice it sort of by channel or you can place it by product or trying to do both relatively quickly. If you look at it on a channel basis, it's really just improvements and the earn returns from the investments that we're making into self serve self serve customers as you know come on it you know five or $6000.

Annualized spend.

So you know in the unit economics are very attractive of that given the cohort behavior and as Dave mentioned you know in their prepared remarks are continuing to get you know better in terms of the muscle and introducing more the DNA there.

We've been pleased the results that we've had and so that shows up in self serve customer additions on the direct sale side.

We've also made some sort of refinements.

To making it easier for customers to use a platform and as Dave was mentioning in response to one of the earlier questions rather than a salesperson being focused on maximizing the magnitude of the initial commitment we know based on the data and the covert behavior for Atlas customers that getting them on the platform is the most critical thing because then usage you know well it.

And from there and so Weve you know decreased you know if some of the customer related friction in terms of getting folks on the platform, which makes it easier for people to adopt and then you know reps getting paid you know for the consumption over time, rather than try to get paid on some maximum initial commitment.

And we're also saying you know really good good success. There. So customers you know from you that to the revenue question customers will start off for May start off consuming less I think from a revenue perspective, it doesn't really matter because even if someone made a big commitment their initial consumptions still is.

All in so from a revenue consumption perspective, the dynamics will generally be the same.

It will be different in terms of like how much do we bill upfront or some of those things that aren't you know areas, we focus on but there's things that sometimes investors focused on and so that's one of the other reasons, what we call up at a damn extra so people can understand that.

Okay, and then I know most most so we're talking about just back to the product view of things. Most what we're talking about really have sort of after atlas related and sort of Atlas centric, there's certainly in any given quarter mixon variability.

Between you know what the ultimate list of deals looks like in a given quarter.

But the piece that we're talking about here are really Atlas centric.

Right, so the acceleration kind of maintenance.

And if you can see him.

And Tyler what what I would also add is that you know, it's not lost on us and that in difficult times, most companies gravitate to selling to the existing installed base and as we've talked about many times. The pass you know we do have a land expand strategy. So our salesforce could easily do that but we thought just myopically focusing on existing installed base.

I would be a mistake because you know we do see a big market opportunity and the added benefit of engaging with them earlier is that you just condition them to start using atlas as the default platform by which they build or application. So so that ends up building a long term durable relationship with those customers.

Yeah that makes sense in just a follow up are you Dave.

You know would just love to get your view on Oracle's Autonomous Chase on service I know you briefly touched on in the prepared remarks, but curious if you have a view on why you think Oracle introduced service like do you think.

It's in response to greater competitive pressure that they're seeing from from you guys and and then would just love to hear if you have a view on the pricing claims from Oracle that it's 30% cheaper.

Yeah sure. So couple of points one they provide a support for Jason in 2014, but you know what they recently announced was support for Jason on the autonomous database in the cloud one it only runs from their cloud too much like what.

Microsoft did with Cosmos and AWB, if the document DB, it's really built on top of relational database. So it's basically a shim that basically tries to you know allow developers to more easily use Jason but the backend is basically the same.

Well engine and so that's the some severe a feature limitations. One simple example could be is that because it's basically adjacent blob you really can't even you know parse you know numeric data, it's all basically text and so there's there's some severe limitations in terms of how you can use those features and obviously.

It does is built on relational backend as there's also a huge set of applications run performance to you. The latter part of your question. This is really in response to the fact that developers are recognizing and are acknowledging that it's so much easier to use Jason or by definition documents to work with data. It's so much easy to easier to co.

Code itself is much more natural it's much more intuitive to it it was much more flexible and Oracle basically acknowledged that and so so we believe that as the world moves more and more towards using documents, we are well positioned a and obviously we've been competing with clones for quite some time and I think we've done quite well.

Thank you.

[laughter] again, if you have a question. Please press Star then one our next question will come from Jack Andrews with Needham and company. Please go ahead.

Good afternoon. Thanks for taking my questions I wanted to ask a couple of <unk> product questions. First I was curious if you could talk about what you're seeing in terms of the uptake of search so far within your customer base and any context around changes in consumption patterns.

Yeah. So just just a were clear we made these products generally available in a in June of this past year and so so it's very very early days, where we're quite excited about the uptake so far and <unk> and the reason just to remind everyone. Why we introduced searches we actually had customers telling US you know we much rather stay on one platform than to have to go.

So you know learn build and maintain a separate platform and our Atlas search product as far as obviously fully managed as well and takes advantage. You know you can take advantage of all the features like MPL. There's good before with you know the regular database server. So it's still early days, but where you know very pleased with results to date and.

And as we get you know I'm more focused attention from the Salesforce Ondis, where you know we feel quite good about.

The trends in the business.

That's great and then just as a follow up how should we be thinking about the monetization opportunity around realm, and just trying to get a sense for well what proportion of your customers do you think need those are the full capabilities between realm and was across so what's the Atlas.

Yes. So the reason we know we acquired the realm mobile database and now have built you know a tight coupling between the mobile front end and the Atlas backend. It's really enables developers to take advantage of a much more you know powerful format. You know rounds architecture is very similar to the to the mom.

Be architecture, a mobile developers find it very very useful to use a the realm mold database realm itself is not meant to be a revenue generator unto itself is really to enable mobile developers to think about using realm and Atlas first because allow them to move that much more quickly so what you'll see a in terms.

The revenue impact will be more on the outlets consumption at the backend versus like I was trying to monetize the front end typically though the mobile database. The client side is given away for free and ER. Our approach is to really enable developers to build you know very very sophisticated applications and one of the key features you know realms thing which is still.

In beta really simplifies the work a developer has to do to be able to synchronize data between the client side and the service side as you can imagine with you know people using mobile devices or other devices that are not the other two a direct network. There's always a chance that you could be offline and so.

Be able to quickly synchronize data between the two between the front of the backend become very very important and it and developers have to incur an enormous amount of complexity and cost to be able to do that to do that manually and so often this capability will make a developed as life that much more easy and will make our platform that much more compelling.

Got it thanks for the color and congratulations on the results.

Thanks Jack.

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

Great. Thank you this is January and take on for Pat.

Dave just one one high level one for you I wanted to touch on the employee engagement survey you mentioned, how do you make mongodb a place people want to work at and then you know keep them engage especially in the current work from home environment.

Thank you.

Sure well. Thank you for that question I mean, you know for a business like Mongodb no. Our success you know is directly correlated to our ability to attract and keep great employees, both on the product and engineering side as well as on the go to market side, and obviously as well as the people who <unk> support the entire.

Business and so are we were very intentional a when Cobra 19 happened to really be very transparent with employees about what we're doing no candidly we were in a very healthy financial position and while we did no worry that there might be some short term impacts the business, we weren't changing our posture.

For potentially laying off any one so I think there's two questions that have impacted anyone and cobot. One can you do you still have a job and too can you do your job safely a those two questions on mongodb have been an unequivocal, yes, and more importantly, we really communicated to all employees about making sure they were.

Earlier in their priorities, making sure that our leaders were clear with their teams about what was important I'm, making sure that you know they understood you know where we're going in terms of what we're trying to do making sure that you know we made it very easy for them to a working from a work from home.

Environment without much disruption and we've also been census is the fact that you know working we're working from home for many people you know, it's very challenging, especially if you have young kids at home or you don't have ample private you know workspace at home and so we've been very flexible with employees to make sure.

They can take the you know sufficient time off work flexible hours et cetera.

And I think we're also you know really I live our values you know and that's a that's another way of saying, we really try and create a culture where people feel like not you know that this is a great place to work that a their respected no matter who they are that they can not just have a job at a career and that.

We want to set them up for success and so so we tried to do that were very grateful for what our employees have done you know since coated our results, obviously, a reflection of that and and we've been hiring aggressively and so we're very focused on on boarding those new employees to make sure that they get quickly implicated in to the.

Sure.

Awesome. Thank you congrats.

This concludes our question and answer session I will like to turn the conference back over to teeth into Cheerier for any closing remarks. Please go ahead.

Thank you and thank you for joining us today I just want to wrap by saying that I'm really proud of the strong execution this quarter in a difficult macro environment.

You know, we've also expanded our product portfolio to really increase our lead as the preeminent data platform on the developer.

As we discussed we've had a record direct and self serve customer additions demonstrating that our strategy of adding new customers is working and lastly, you know we're pursuing a big market opportunity and cobot has only accelerating long term trends. So thank you for your time and we'll talk 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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