Q1 2022 MongoDB Inc Earnings Call
Good day and welcome to the Mongo DB first quarter fiscal year 2022 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. You ask a question you May Press Star then 1 on your.
Telephone and to withdraw your question. Please press Star then 2 please note. This event is being recorded I would now like to turn the conference over to Brian didn't you from ICR. Please go ahead Sir.
Great. Thank you Chuck.
Good afternoon, and thank you for joining us today to review a mongo DB is first quarter of fiscal 2022 financial results, which we announced in a press release issued after the close of market today.
Joining me on a call today are Dave and a cherry, our president and CEO, a mongo DB and Michael Gordon Mongo, DB CLO and CFO.
During this call we will make forward looking statements, including statements related to a market in the future growth opportunities the benefits or a product platform, our competitive landscape customer behaviors, our financial guidance, our planned investments and the anticipated impact of a COVID-19 pandemic on our business and a results of operations as well as on our clients from a macroeconomic.
Comic environment.
These statements are subject to a variety of rest of uncertainty is a cause actual results to differ materially from our expectations.
For a discussion of the material restaurant certainly as it could affect our actual results. Please refer to those described in our SEC filings.
On our most recent annual report on form 10-K.
Any forward looking statements made on this call reflect our views only as of today and we undertake no obligation to update them.
Additionally, we will discuss non-GAAP financial measures on this conference call.
Please refer to the tables on our earnings release on the Investor Relations portion of our website for reconciliation of these measures to their most directly comparable GAAP financial measure.
I'd like to turn the call over to Dave.
Thanks, Brian and thank you to everyone for joining us today I will start by reviewing our first quarter results before giving you a company update looking.
Looking quickly at a first quarter financial results, we generated revenue of $181.6 million on a 39% year over year increase and above the high end of our guidance. We grew subscription revenue, 40% year over year Atlas revenue grew 73% year over year and now represents 51% a revenue and we had another.
<unk> quarter, a customer growth ended the quarter with over 26800 customers.
June marks the fifth anniversary of launching Atlas are among the DB database as a service offering in Q1 Atlas reached a remarkable milestone becoming a majority of revenue in just under 5 years deployed in over 80 regions around the world across AWS Azure and G. C. P. Atlas is now a nearly 400 million.
On a revenue run rate business growing over 70% year over year.
While we are proud of how quickly we have grown this business since its inception, we are confident that we've only scratched the surface of the opportunity ahead of us.
As we look back at the first 5 years of Atlas, we see a story of innovation aggressive investment and demonstrated ability to take smart risks some of which seemed quite controversial at the time.
We launched Atlas in June of 2016, as a self serve only offering on AWS, although in retrospect, a decision to launch an independent database as a service business seemed like a no brainer. It wasn't obvious at the time there was a fair amount of skepticism in the market got an independent company could build a successful cloud service well, both partnering and competing with a <unk>.
Hyperscale cloud vendors.
A year later, we launched Atlas on Azure and G. C. P. Even though it was more work and added more expense to support all 3 cloud providers. We made this a priority as you understood from the outset that as a cloud became mainstream customers would want a multi cloud solution.
Due to the strong initial reception of Atlas in our direct sales channel, we invested aggressively to achieve feature parity between enterprise advanced and Atlas. We reached that milestone in mid 2018 ahead of our original schedule and since then have led with innovation on Atlas on.
Our ability to quickly ship new features and get customer feedback has not only allowed us to innovate faster, but that's also benefited our enterprise advanced customers.
From an outsider's perspective, 1 of the more controversial decisions. We've made was to change our license from a G. P. A L. S. P L. A in 2018.
Our objective was to remain true to a open source roots, while ensuring that we could build a meaningful database as a service business in the cloud era.
While some suggested this will limit the adoption among a D. B, we had conviction that we can better serve customers with this change mom and babies popularity with developers has only continued to grow after a drop in adopting S. S. P. A L.
Given the success of Atlas a number of open source companies have now switched to a similar license structures.
Around the same time, we acquired a M lab, which not only increased our scale on the cloud, but also increased our expertise in the self serve channel we uncovered a virtuous cycle between a field sales organization, our inside sales team a customer success organization and our self serve channel investments in any 1 area led to the acceleration for the entire cycle and this virtuous cycle.
Has it been a key enabler of our growth to give you. Some context. The majority of Atlas revenue was originally sourced by our self serve channel, but the majority of growth has come through the direct sales channel.
In 2019, we acquired realm, the world's leading independent mobile database and announced a beta versions of Atlas search and Atlas data Lake with these actions. We took the first steps to move from offering a database to becoming a comprehensive application data platform. Our expanded product vision was driven by a customer's desire to leverage market even more.
Broadly across their organization.
In 2020, we continue to make changes that made it easier for customers to start using Atlas.
These changes resulted in a big uptick in new customers, resulting in over 25000 customers of almost every size and from nearly every geography and industry using Atlas today.
Looking back at the first 5 years Atlas, we see a few key lessons learned first well innovation strong execution and unconventional thinking contributed to the growth of Atlas. None of this would've been possible without mommy bees outstanding product market fit and a massive market, which is estimated by IDC to be 73 billion in 'twenty 'twenty 1.
With a 175 million cumulative downloads, a which over $70 million. During the last 12 months Mongo DB continues to be the world's most popular a modern general purpose database.
Popularity among them to be as a foundational pillar for the success of Atlas.
Second given a choice customers, a rather focus resources on building new applications and shipping New features quickly then spend time and resources on the undifferentiated heavy lifting a managing their distributed application data infrastructure.
Third multi cloud is proving to be even more important than we originally imagined.
A experienced firsthand a cloud providers do have outages. So building resilience across cloud providers is critical for many customers. Moreover, as cloud providers differentiate among themselves being able to leverage different services from different cloud providers is something customers want to do finally customers value solutions that make it easy to move from 1 cloud provider to another.
Reducing lock in with any 1 cloud vendor.
As we look to the future there are a number of reasons why a bullish about a long term prospects first we're seeing increased adoption enterprise adoption of Atlas.
In the first quarter approximately 2 thirds of new business won by our field sales team was Atlas more than double the percentage from 2 years ago, not only are customers choosing more of Atlas that or building or moving mission critical workloads onto a atlas, which is the biggest driver growth of a more than 1006 figure customers.
On cloud partners, a recognizing the value that among a DB and Atlas bring to their own businesses using Q1. As an example, we had a record closed sales quarter with AWS G. C. P and Alibaba, we are seeing increasing opportunities to expand waste a partner with cloud providers through both tactical integrations as well as go to market initiatives to enable a more customer.
Around the world to derive the benefits of using Mongo DB.
Finally, our C level customer conversations indicate that our application data platform strategy is clearly resonating in the marketplace.
Customers, increasing tell us that they prefer to standardize on a on a general purpose platform rather than use a myriad of single function databases that add more cost and increase the complexity a running workloads in the cloud.
Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the first quarter.
Commerce tools, the leading next generation E Commerce platform selected <unk> Atlas to power the world's most popular e-commerce sites used by over 200, leading global brands, such as Audi AT&T Antiphony Commerce tools is now able to scale as a platform and flexible API first approach to support the world's biggest retailers. So they can do.
<unk> unique and seamless shopping experiences across all digital touch points at the beginning of May among a would you be in commerce tools helped 1 of the world's largest toy companies launch a massive and highly anticipated campaign to millions of fans across the world without a hitch.
You I path, a leading enterprise automation software company offering an end to end automation platform that combines a robotic process automation with a full suite of capabilities to enable organizations to rapidly scale digital businesses business operations.
Chose market it would be as their underlying data persistent platform to increase efficiency force developers and accelerate time to market with new features and functionality.
Leading provider of cloud based compliance solutions Avalon is migrating from sequel server to among a D. B to support its complex data requirements with more than 30000 customers. A 95 countries. The company need a database to keep up with billions of transactions as a rapidly scales as a platform to support new industries geographies and compliant services.
1 of the largest groceries.
Sales in the World chose <unk> Atlas to strengthen this digital portfolio and scale it services across E Commerce platform and in store offerings. The company, which is more than 2000 stores selected <unk> to replace Cosmos DB after searching for a scalable solution with a flexible data model that would give us developers a richer feature set and better visibility to their data.
[noise] tackle created by a leading Japanese intercompany cyber agent is a dating application with over 6 million registered users. The App, which has made over 200 million matches. Since inception was deployed on Atlas for ease of use the capacity stores 7.5 billion documents and the ability to upgrade very large clusters, while scaling.
To accommodate large user growth.
In summary, we're off to a strong start in fiscal 'twenty 2.
I'll turn it over to Michael.
Thanks, Dave as mentioned, we delivered another strong performance in the first quarter, both financially and operationally.
I'll begin with a detailed review of our first quarter results and then finish with our outlook for the second quarter and full fiscal year 2022.
First I'll start with our first quarter results total revenue in the quarter was $181.6 million up 39% year over year.
Subscription revenue was $174.6 million up 40% year over year and professional services revenue was $7.1 million up 29% year over year.
Overall Atlas a strong performance continues to be the largest contributor to our growth.
Atlas grew 73% in a quarter compared to the previous year and now represents 51% a total revenue compared to 42% in the first quarter of fiscal 2021, and 49% last quarter.
As Dave discussed Atlas has continued strong growth at increasing scale reflected strong product market fit our large market opportunity and a clear market shift among customers of all sizes towards a fully managed cloud database offering.
Given that Atlas is now the majority of our revenue and that we continue to expect it to grow as a percentage of revenue.
I thought it would be helpful to remind everyone how atlas impacts our reported financials.
First Atlas revenue is recorded on a consumption basis, and therefore varies with usage, whereas enterprise advanced includes a term license component that is recognized upfront. So for a comparable dollar size contract both enterprise advanced and Atlas will recognize the same amount of revenue over the contract term, but the Atlas contract will generate less initial revenue.
Yeah.
Second self serve Atlas customers and a growing portion of our direct sales Atlas customers do not pay us annually upfront as is customary for enterprise advanced customers, we believe that payment and commitment flexibility facilitate atlas adoption and usage, which will ultimately maximize long term revenues and cash flows. However, as a result Atlas generates.
Less deferred revenue and less upfront cash than enterprise advance D. A.
Illustrate this point as of Q1, nearly 40% of our total a R had a little or no impact on our deferred revenue.
Finally, Atlas has a lower overall gross margin the enterprise advanced because of its infrastructure component.
That said, we've significantly reduced the margin difference between the 2 as Atlas a scaled in addition on an apples to apples functionality basis Atlas is accretive to dollars of gross profit.
As a reminder, we do not try to influence which of our products customers choose what we really care about is customers adopting and expanding their use a margarita you be we're.
We're happy to have customers run monger at being whatever way best suits their it strategy and we expect it enterprise advance will continue to grow, especially on regulated industries, such as financial services and healthcare that are moving to the cloud at a more measured pace.
During the first quarter, we grew our customer base by over 2000 customer a sequentially, bringing our total customer count to over 26800 customers, which is up from over 18400 in a year ago period.
Of our total customer count over 3300, or a direct sales customers, which compares to over 2200 in a year ago period.
As a reminder, our direct customer count growth is driven by customers, who are a net new to our platform as well as self service customers with whom we now have established a direct sales relationship.
The growth in our total customer count is being driven in large part by Atlas.
Switch it over 25300 customers at the end of the quarter compared to over 16800, and a year ago period. It.
It is important to keep in mind that growth on our Atlas customer count reflects new customers demand would you be in addition to existing enterprise advanced customers, adding incremental Atlas workloads.
We had another quarter with a net are expansion rate above a 120 per cent. We ended the quarter with 1057 customers with at least $100000 on air or an annualized MRI, which is up from 780 on a year ago period.
The continued strong growth in customers with a $100000 or more in a ours an indication of the success of our land and expand go to market strategy and the fact that we are increasingly becoming a strategic partner in a database standard for our customers.
Moving down the P&L I'll be discussing our results on a non-GAAP basis, unless otherwise noted.
Profit in the first quarter was $131.6 million, representing a gross margin of 72 per cent, which is consistent with last quarter and down from 73 per cent and a year ago period overall.
Overall, we are pleased with our gross margin performance, which is only seeing a modest impact from Atlas as it becomes a bigger portion of our revenue. Despite its infrastructure component. We've had good success driving greater efficiency as Atlas scales to minimize the gross margin impact. We continue to expect that we will see some modest reduction in overall company gross margin as Atlas continues to grow.
As a percent of total revenue.
Our operating loss was $8.4 million, a negative 5% operating margin for the first quarter compared to a negative 6% margin in a year ago period, our outperformance versus our operating loss guidance was driven primarily by revenue outperformance.
Net loss in the first quarter was $9.5 million, a 15 cents a share.
Based on $61.4 million weighted average shares outstanding.
This compares to a loss of $7.3 million or <unk> 13 cents a share.
On a 57.6 million weighted average shares outstanding in the year ago period.
Turning to the balance sheet and cash flow, we ended the quarter with $935.6 million in cash cash equivalents short term investments and restricted cash.
Operating cash flow in the first quarter was positive $10.2 million driven by strong collections. Following a record Q4 sales a shots.
After taking into consideration approximately $1.8 million in capital expenditures and principal repayments, a finance lease liabilities free cash flow was positive $8.4 million a in the quarter.
This compares to a negative free cash of $8.5 million in the first quarter of fiscal 2021.
Despite the stronger than expected Q1, we continue to expect that we will burn cash in full fiscal year 2022, as we continue to invest significantly in the business.
I'd now like to turn to our outlook for the second quarter and full year fiscal 2022.
For the second quarter, we expect revenue to be in a range of a $180 million to a $183 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 a range of 43 to 40.
Based on $62.4 million weighted average shares outstanding.
For the full fiscal year 2022, we now expect revenue to be in a range of 771 million to $784 million for the full fiscal year 2022, we expect non-GAAP loss from operations to be $76 million to $68 million and non-GAAP net loss per share to be in a range of a $1.38 to a dollar twenty-five.
Based on $62.6 million weighted average shares outstanding.
To summarize I'm gonna be delivered excellent first quarter results, we're driving high levels of growth at scale, driven by our exceptional product market fit and customers' demand for a modern application data platform. We continue investing to capture a large opportunity ahead of us we're seeing attractive returns on those investments and are excited about our positioning for the future.
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 May Press Star then 1 on your Touchtone phone if youre using a speakerphone. Please pick please pickup your handset before pressing the keys and to withdraw your question. Please press Star then 2 well you asked that you. Please limit yourself to 1 question and 1 follow up and if you're.
A further questions you may reenter the question queue and on.
At this time, we'll pause momentarily to assemble a roster.
And the first question will come from Sanjay Singh with Morgan Stanley. Please go ahead.
Thank you for taking the questions actually wanted to start with a pretty high level question, just given on the traction that you're seeing with that.
In the cloud and also in terms of the customer accounts.
1 goal in mind in terms of where Mongo DB you can get to you I mean is a 1.
100000 customers possible. If you look at some of a modern software company I think it's a lot like north of 200000, a data dog, which is a little bit younger company that you guys are sort of in the 15.
15 to 20000 spoke about 20000, where do you think from a.
Customer base perspective, Mongo DB can ultimately get to.
Hum.
Yeah.
We've said many many times, we're going after a 1 of the largest markets in enterprise software and while obviously most of the dollars per customer on the tying a the count what I called a global 2000. So obviously, there's only 2000 of those customers.
There's a massive opportunity to grow the long tail and so while I don't want to speculate on what the high end of the number could be I think that number could easily be.
A lot higher than it is today and a potentially even 6 you know 6 figures, but a.
At this point.
On the we're not constrained by market, it's more about our operational capability and how quickly from scaled a business.
Got it and then as a follow up let me sort of.
Get your latest views on the demand environment.
As we come out of a pandemic.
<unk> did a really good job more or less sustaining growth in the back half of last year, given what youre seeing in terms of new.
A new project bidding on.
On digital I'm more applications being on being rolled out is there a is there a potential for growth to accelerate coming on the back half or is it more of a <unk>.
<unk> growth framework on that Youre thinking about as we go into the.
The rest of it.
As Michael noted, we are raising our guidance a year. So we feel pretty good about the demand environment, we think that as customers recognized that it needs to be a digital first due to the pandemic, it's not like they're going to sell he said well you know I'm going to go back to my more costly and more inefficient distribution channel.
I think they're going to recognize that a having a strong digital presence is critical to go into a business.
And a and when they step back and think about how they drive their business every company is not thinking about using software and data as a competitive advantage that means every company is thinking about how can they drive the productivity of sales force developers and every company is thinking about how can I you know I can't buy my competitive advantage I've got a build it and so I think that book.
This positions us well for the future as people as customers and organizations come out of a pandemic.
Excellent I appreciate that that debt.
Thanks Angie.
The next question will come from Raimo Lynch Chow with Barclays. Please go ahead.
Congratulations from me as well a amazing quarter.
First question I had 2 questions 1 worse on a relationship between E and directly if I look at this quarter, there was like lots and lots of momentum around direct a well.
And while you just like kind of like a little bit in the background is that kind of a way how you see it as well a good playing out on the future. So I'm a words have customer is kind of a fully realized they should be in a cloud and that's a cut off the path for it or is that kind of a delay a factor of a potentially coming back a little bit more in the second half after a year.
And then next year.
And then second question is on self service and asked me coming out of a disciplined I mean do you think self service will it started picking up again.
As a kind of develops a have a little bit more money or is it all going to be a direct going forward. Thank you.
Thanks, Raimo so on the first part of your question about the relationship between our sales force and a a I would just tell you that a we are not prescriptive about what products to sell to customers. We basically wanted to serve the customers that the best way that they want to be served and so for some customers. It's there's still have a very measured approach to moving to cloud.
Others are going much more aggressively to the cloud and we obviously have a offerings for for both sets of customers I would tell you that we clearly see a.
You know the high end of the market getting very very comfortable moving mission critical workloads to the cloud and in particular to obviously to Atlas and so as a 1.1 of the comments I made in the prepared remarks is that the majority of our 6 figure customers.
Our now a those.
Those are a atlas only.
Hum.
Accounts and so that tells you a lot about the sophistication of our customers who are using Atlas at the high end.
And and and again I I think there's always going to be some seasonality the mix between Atlas in the a and we used a still believers that he was gonna grow healthily over the long term and then with regards to self serve as a self service is a very very important channel.
1 of the things on 1 of the comments I made in the prepared remarks was to basically explain that the majority of sourced revenue for Atlas came from the self serve channel not just customers, but revenue now the majority of the growth came from our sales force. So self serve as a very healthy part of our business and we see a nice flywheel.
Effect between self serve and direct sales.
And so I I don't want you to think that because of what you. What you. When you look at a numbers things like a the self serve business is not growing what happens is that our sales force is now a very adept at basically picking off the highest quality self serve accounts and growing those accounts that much more quickly so the self serve channel.
Is paying huge dividends for us and we're investing in all parts of the business Okay.
Okay perfect. Thank you congrats.
Yes.
The next question will come from David Hynes with Canaccord. Please go ahead.
Hey, Thanks, guys, a great set of numbers here.
Michael I'm going to start with you.
I feel silly, asking that's coming off of a 73% growth quarter and I know its its clearly not contemplated in the guide, but it is possible that Atlas could accelerate.
From here as we lap quarters, a year ago, where expansion was coming under pressure during COVID-19.
Yeah. Thanks for the question so when I think about it I would go back to what Dave said and that we really think about the business from a channel basis and I think that this is important to sort of underscore a especially for people who haven't been following the story closely.
So when you think about the channel we've got the self serve channel, which is almost entirely Atlas a and has seen a dynamics and we've got a bunch of a disclosure around that and then there's a direct sales channel direct sales channel really you can think of as having 2 main components sort of a mid market component and then a field component a higher enterprise component. What we've seen is that mid market component is also.
Almost entirely Atlas and 1 of the biggest factors when you think about what will the Atlas trajectory look like over time is how rapidly does the field enterprise channel adopt public cloud right and we sort of said for a while but that's the biggest swing factor overall in terms of the Atlas numbers clearly you can see in the in the mix of results from.
Q1 a.
In some of the vignettes that Dave shared in terms of the narrative a it was a very strong quarter for Atlas. When you look at the mix of deals in the enterprise channel roughly 2 thirds of a new business was coming from Atlas, which is a very significant kind of a high watermark.
And so you know that has a impact as we've talked about in terms of the financials in terms of.
Not having a term license revenue and other things, but that's a sort of factors in to the rest of the year and so I think that's how we'd have to think about it. It's really ultimately it will depend on what your assumption is around that we do think over a long term it will trend, but really in Q1 is from more of a mix of deals issue.
Yeah, Yeah, Okay. That's helpful color and then.
David as a follow up.
We think about the introduction of new functionality over time, and how you take that to market. Do you think there are capabilities that may come in a form of new skus or a should we expect.
On the innovation to be more aimed at kind of differentiating the core offering you know I think of like realm in Lake in search and what you did there just trying to think about kind of a longer term monetization of R&D efforts.
Yeah. So that's a that's a great question, David what I would tell you is today our focus is really about innovating on the core and then a our new products are all about finding new ways to acquire new customers and as well as expanding the lifetime value of our existing customers and so today. The revenue does show up a mainly in Atlas.
Versus a separate SKU, but you should not assume that that'll be the case long term, a we have a pretty aggressive innovative agenda innovation agenda and so I.
Over time, you'll see us add more products and more skus.
Helpful. Thanks, guys congrats.
Thank you.
The next question will come from Brad Reback with Stifel. Please go ahead.
Oh, great. Thanks, very much David from a high level is there any way to know how much of what your customers are spending with you is net new budget versus what's being reallocated from legacy a relational databases.
Well I would say that as companies recognize that a.
On the heart of their value proposition is how effectively they use software and data I have to believe that their investments are in building software applications is growing over time.
Now, we believe that applications have a certain a lifespan.
Pending on the application could be a short a 3.4 years it could be as long as 15.20 years and so applications have a natural retirement right now they could there could be situations where applications are just not serving the business are there the unused as effectively and so people may may decide that there's been there's some changes that need to be made more quickly and so.
It's hard for us to Suss out you know all the time like are these net new budgets versus existing budgets a well.
But we recognize that we have to make a compelling business case and so our sales organization is quite adept at just making sure that debt as you know whenever you get a 6 figure deal someone's got a justified that expenditure. It just no one's just going on you know had somewhat of a 6 week a check and so that that either is about advancing the business forward a reducing cost.
On the existing infrastructure, what have you and so we typically you know ensure that our debt. We've built a compelling business case for a customer decided to choose mongo DB and and so it's a business cases compelling there'll be a dollar available even if it's stealing dollars from existing budgets.
Yes, I would say, it's just a I would just add Brad so away from budget, because that's what a a little bit hard for us to a perfect visibility on we have a pretty consistently seen that about a quarter of the enterprise advanced wins are a relational migrations that number is lower on Atlas because that was tends to be you know new applications as people are adopting.
Adopting the cloud, but that's been a pretty consistent number that we've seen.
Great. Thanks very much.
Brett.
The next question will come from Brent bracelet with Piper Sandler. Please go ahead.
Good afternoon, and thank you named a question here.
Hey, Dave I wanted to drill down into kind of this 5 year anniversary of Atlas clearly your messaging kind of a milestone shift in an enterprise interest.
As a platform could you talk a little bit about maybe the number of $100000 Atlas customers are you seeing any a million dollar plus atlas customers, yet clearly it sounds like it's starting to really resonate with enterprises, but any additional color you could talk about relative to the size.
On some of these Atlas enterprise deployments that would be helpful. And then 1 quick follow up for Michael.
Sure the a 6 or a customer count grew quite handily from last quarter to this quarter and a big driver a that was Atlas and so we see a number of not only 6 figure customers on Atlas, but we also see a quite a large number a 7 figure customers on Atlas. So yeah, you should be there should be no misunderstanding.
Standing people are building and deploying very sophisticated complex mission critical workloads on Atlas and Atlas has really proven just but ubiquity of its reach we're in over 80 regions around the world. So we are by definition, because we run across AWS Azure and G. C P where the most widely geographic.
<unk> widely available a database as a service offering in the market.
Some of the capabilities, we recently introduced like a global clusters. So customers can run the same workload across 2 different cloud providers something no 1 else can do and Theres a whole bunch of other people, whose around surround a data partitioning privacy and security that not many people can do so people run very very sophisticated workloads.
On Atlas and I think youre seeing the results of the enterprise and the high end of the market recognizing that and more workloads moving onto Atlas weigh on Brent <unk> sort of alluded to this but just to give you. The stats. So it's clear for everyone 60 per cent roughly 60 per cent of our customers at that $100000 or greater.
Mark have Atlas spend.
Above that level.
Alright, so it doesn't mean that they have only atlas spend they may a atlas N D. A but 60 per cent of the customers over that $100000 threshold and a atlas spend that would qualify them alone for above that level.
Question for you on I believe you talked about record partner revenue contribution I think it was from Alibaba or was that just mongo DB as a service was it predominantly alibaba or were there other amongst a service partners. There just just clarify what that <unk>.
Record was and what you're referencing relative to kind of a strength you saw on Alibaba and others in the quarter. Yeah. We saw a huge increase in a joint wins with a to be clear not just with Alibaba with Amazon and G. C P as well and a with Alibaba is not Atlas because.
Due to the regulatory environment in China, we cannot offer a atlas directly so.
So we partner with both Alibaba and Tencent and we.
We started with Alibaba first and and what we've done is repurpose some of our local sales team in China to really enable the Alibaba organization to more effectively position and articulate the value proposition a among a D. B and that's you know we're seeing the results.
There got impacted quite positively a very very you know in a in the short timeframe we've done that.
So much so that even Alibaba is investing more in building a center of excellence or on Mongo DB. So we feel really good about what's happening with Alibaba Tencent. We're in the early days and a plan is to do the same there in terms of operating operationalize their capabilities to sell them I'm going to be as a service to their customers as well.
Helpful color and great to see the momentum here. Thank you.
Thank you Brent.
The next question will come from Jason <unk> with William Blair. Please go ahead.
Yeah. Thank you.
Dave you talked about your portability value proposition and I'm. Just wondering have you seen any noticeable change from your customer base on how they're viewing a.
A databases from cloud providers like AWS and Azure just in terms of that that cloud lock in a risk and then does it differ by the size of customer in other words larger customers tend to be more worried about it any color there would be great.
Yes, so what I would tell you is that 1 of the compelling value props are among a D. V. So you can run long would you be anywhere and what that really means that you don't have to rewrite 1 line of cold weather you a.
Run it in your own datacenter, you manage yourself in a cloud or use it as a service across AWS G. C. P. A azure and so that becomes a pretty compelling value proposition because as we all know business conditions change cloud providers, a differentiating among themselves a offering price concessions on new.
<unk> that customers want to take advantage of and what they don't want to do is be locked into any 1 environment.
In terms of competition.
We have been competing with you know offerings clone offerings from Amazon and from a Azure and obviously all the cloud providers do offer some types of database services. So there's also other competition available and our win rates against them is exceptionally high the clones are compromised because theyre not built on the same architecture.
Mongo DB, they're built on a relational back end so there they're a compromise in terms of features and performance a and and we will go toe to toe with any relational database because we know the superior a architecture the scalability of our platform and the ability for customers to move much more quickly on a longer to be versus any other solution. So we.
A pretty good about the competitive environment a them today.
Just a quick follow up from Michael Michael The operating margin guidance for the year does that assume that your expenses are going to be kind of back to normal as we come out a COVID-19.
Yeah, we talked about in the March call was that we assumed a significant resumption of expenses that were not realized in the context of COVID-19, mostly sort of office.
And travel related a and I think we had quantified those in the back half of a year, a roughly $20 million to $25 million and so see no reason for change on that based on you know kind of the global situation related to the pandemic.
Great. Thank you guys.
The next the next question will come from Kash Rangan with Goldman Sachs. Please go ahead.
My cash.
I'm proud of what it might be a chair.
Yeah.
And the next question will come from Karl Keirstead with UBS. Please go ahead.
Oh. Thank you maybe 1 for day, 1 for Michael a deal I'm just wondering if you could comment on the pace at which a.
The firm was able to add a quota carrying reps during the quarter on whether the performance during the quarter has changed your hiring plans for the full year and then maybe Michael a when when you were providing Q1 guidance 3 months ago. You did mention that I think it was on the on the E side, a a rev rec.
606 related issue that might cause subscription revs to be down sequentially. It. It clearly wasn't but I'm wondering if whether that issue that was on your mind transpired and was simply offset a.
Oh my goodness elsewhere.
Maybe you could comment on that thanks, so much.
So a call I'll take the first question regarding the pace of hiring we're trying to hire sales people as fast as possible. The main reason being we're going after a really big market and a frankly.
And in enterprise sales you have to show up to win and so we know when we go head to head against the competitors per the last question asked that a win rates are exceptionally high but you do have to show up to win and the many areas of the world that we're really underpenetrated and so we want a hire salespeople.
To make sure that we can go after those opportunities, but it's not just simply it's hiring like 500000 salespeople in 1 quarter you have to make sure you have the right supporting infrastructure in place in terms of sales management pre sales technical skills. The right enablement, a sufficient ramp time et cetera. So there's a whole operations that we have to kind of make sure that we have the right support.
Structure to make those salespeople successful, but we're being very aggressive in terms of hiring salespeople as fast as possible.
Michael on from the second question was for you, yes. So on the a on the variability we will see a variability quarter to quarter based on the mix of deals and that does have a revenue implications given a term license component under 6 a 6.4 enterprise advance I would generally characterized a quarter as good for both EMEA and Atlas.
As a E had a particularly difficult compare given.
The lumpiness on a term license recognition in the base period, but generally it was a strong quarter on on both products and on a year.
It was a particularly good quarter on a relational migrations.
Got it okay helpful. Thank you both.
Thanks Carl.
The next question will come from Tyler Radke with Citi. Please go ahead.
Hey, Thanks for taking my question, a it looks like Youre, starting to see a lot more success selling atlas directly and into your your large customers and Dave I think you referenced a cosmos DB deal that you displace them I'm curious kind of how the competitive landscape may differ relative to E.
When you are selling those atlas deals to a large enterprises do you find your you're displacing a cloud native solution and and if so kind a curious who you're running into most frequently.
Well, obviously you have to remember that if someone's gonna choose outlets by definition. They have already chosen long a would you be because atlas is the obviously the.
Service offering that underlies among a D b.
What I will tell you is actually this is that 1 of the real advantage of them on a D. B has the ability to scale your application through something that's called shorting.
You know when customers try and do that themselves.
On their own premise.
We find that some customers get intimidated by the fact that day. They can oh, how quickly they can scale a environment or they may not have sufficient compute capacity to scale their environment as quickly as they want when he moves to the cloud and by definition you would now have a elastic capacity it becomes much easier to leverage the power of a market.
You'd be in a cloud world the distributed capabilities the ability to easily short data the ability to use capabilities to partition data whether it's for a.
Privacy and security regulations around data in different parts of the world or whether it's for performance moving some day to closer to and some end uses and different parts of the world. All of this capable this gets far better exposed on outlets that someone's trying to do that in their own data centers. So that's the added benefit of customers that customers see by running a these mission critical work.
A list on Atlas.
Great and a follow up maybe for Michael or you Dave. So during the pandemic you, obviously invested pretty aggressively in sales head count I think in the first half of last year, a sales and marketing head count grew close to 60%.
Curious just how the ramp of those those reps have gone obviously, it's probably a lot different you know getting those folks up and running in a remote environment, but maybe if you could just comment on.
You know the ramp time of those sales reps and kind of the percentage of your sales reps that are fully ramped at this point.
Yes, so what I would tell you is that we recognized.
Very early on that wants to everyone's a work in this virtual world 1 of the biggest 1 of the most typically 1 of the most fragile parts of any sales realization as your new reps those reps were ramping haven't closed any business and and they're obviously a nervous about you know.
On putting up numbers on the scoreboard, we went on or a way to really ensure that we provided at the right level of enablement, a right level support a.
And so on and so forth to help those reps ramp as quickly as possible and in general the ramping of the new reps is in line with our expectations and a we're putting a lot of focus there a we do actually for a employees across all functions not just sales, but you have a particular focus on salespeople because by definition we need.
Them to produce and a certain time frame and so there's a lot a focus on making sure that a reps are ramping and we have different levels of training from boot camp to advance sales training specialized product training to ongoing product updates as well as a a lot of inspection by sales leadership in terms of their activity and a quality of their pipeline and.
So on sort of a fourth so we have a lot of measures in place to ensure that we can really track is a sales rep ramping a appropriately given their time on tenure and the field a.
St. We do the same thing for our inside sales people, we assume obviously a shorter ramp for inside sales people, but in general we've really instrumented our sales process to a.
I identify where people may be at risk.
And a put in a remediation obviously programs in place as soon as possible.
Yeah. The only other thing I'd I'd add a Tyler is we're consistently looking to expand the sales force to Dave's earlier comments, given how things are a footprint coverage is a relative to the magnitude of our market opportunity and.
And we tend to be operationally a constrained in terms of how much we can add obviously if there are.
Locations pandemic or otherwise, where we can incrementally or opportunistically add even faster. We will we will go do that but that's been sort of a long and I think it will be a long.
Focus area, given the magnitude of our opportunity.
Thank you.
Again, if you have a question. Please press Star then 1 our next question will come from Jack Andrews with a Needham. Please go ahead.
Thanks, and congratulations on the results David I was wondering if you could provide an update in terms of how the global a size might be helping you you've talked in the past that a number of them had been building when would you be practices. So could you maybe frame for US is there you know what proportion of deals that they might be factoring in today and I'm also just wondering are they helping you.
To gain access to more of these C level conversations youre having overtime.
Right. So there's a quite a synergistic relationship between long a DB and the size because in many cases, the excise act as either the companies developing harm or augment their existing development organization. So by definition debt to developers of the applications and they're the ones using long a D V to build those applications.
A S size. We're also building cloud migration factories their practices in that area to help our customers migrate workloads from on premise to the cloud and so so weird involved working with a number of a larger size people like Accenture Tcs cap jumps cap Gemini emphasis et cetera, you know working with them they are differing.
Programs, you know by a by organization.
You know Accenture has there among would he be accelerate a program cap Gemini and Tcs have different programs focus on different verticals. A we also work with frankly, some boutique size, who have expertise deep expertise among a D b or perhaps a deep expertise in mobile or a deep expertise in a particular vertical or a particular geography and so we work.
With a boutique size as well do you know if the situation warrants. So I would say in general the S sides are that that business overall is growing but there's plenty more to do and a 1 of the you know the challenges of working with these larger sizes that theyre very decentralized. So so even though you may have success in 1 geography or even 1 accounts doesn't mean.
That translates very very quickly across the entire organization, but you know as we get more credibility as we are a more wins as a reputation gets stronger we're seeing these <unk> come to us to work with us on more and more of a opportunities.
Well that's great. Thanks for the color.
Thank you.
The next question will come from Fred have Meyer with Macquarie. Please go ahead.
Okay. Thank you have a similar to the question at this time on a I guess.
Could you give an update on how your ISP ecosystem is progressing and then also how you're seeing mongo DB adoption Isps trending between adoption, a mother Atlas or on a wall.
Well, there's a prepared remarks, you talked about Congress tools, which is and I see a really helping retailers and so we're having a lot a success with them. There's a number of other ice vs that we work with a will in fact have a hum a dedicated sales team now that's pursuing Isps and and it's really a 2 step.
It's a process 1 is a cell to process where are we.
We get the you know the either the CTO of the CEO or like the chief product officer or their teams to think about building their new version of their product a re platform existing product off a legacy database onto among a D. B.
And then the second step is then working with them to go close their first set of customers and then we're the beneficiary of their growth. So that that does a team that's dedicated on doing that and a I don't have our IC count in front of me, but it's a numbers in the hundreds and that's a big opportunity for us and you're going to see us put more focus on time and resources.
Serving a ics.
Thank you and then just a follow up.
So during the prepared remarks, you also mentioned about how you ipass is using longer any deep a persistent player and I'd like to dig into that a little bit more debt here we've.
We've seen tech companies talking about low code no code a lot from something like a thousand per cent more than last year when they want a measured it and we certainly picked up on low code a no code company using longer IBD. In addition to what you iPad is doing a could you talk to US about why you think and why Youre seeing low code and no code vendors choosing your database and generally what that means for you.
Overall organization and go to market is as these platforms kind of catch on a wrap up.
Yeah. It is a I would say in general we see Ais fees and obviously, there's a segment of them being low code or a no code vendors, who are using who choose among a it'd be 1 because of the day to model. The document data model. We would argue quite convincingly I would add is that is the best way to work with data the flexibility of the data model allows us allows you.
To a really manage data the way developers thinking code also allows you to make changes very very easily. So if you talk to anyone who's worked with a relational databases a by the time. The the application gets passed rub 1 a rep to the day to model. It gets very brittle and it becomes a much harder to make on.
Going changes you do not have that problem with mom going to be the second point is that going to be is by definition. The most distributed and scalable platform available was built from the ground up to be a distributed.
Data platform and so I see us really appreciate that because they serve a myriad of customers and so they want a platform that can scale.
And there's a third thing is that you know the among the beacon can run anywhere it's not a cloud only platform. It's not a non premise only platform. So depending on the Ics business model. They can deploy it is shrink wrap software. They can offered as a service in a cloud or anything in between and so among the you know enables them to maintain a whole host of options.
That's why I think you'd see ice's choosing among a D b.
Thank you.
The next question will come from Kash Rangan with Goldman Sachs. Please go ahead.
Hi, Thank you very much congratulations center on a wonderful quarter, especially the cloud traction you're getting day, but I wanted to just gives you a perspective on a.
Incrementally speaking as the economy opens up a you've been a very successfully the operating and producing results in a minute.
Social setting as we open up what are the incremental opportunities debt Pongidae, we can take advantage of a.
That you've put on with the virtual setting during depend I mean, thank you so much once again thanks.
Thanks cash.
I think we said this last year and we said that I think you even more most recently in the last quarter, while we've done well during the pandemic. We do believe that Covid has been a slight headwind to our business. We know that there's still an enormous amount of deal scrutiny, especially on big deals. We know that approval still take a long time to get done.
We know that you know if customers are worried about the health of their business there'll be cautious about making investments in their business with new technologies. So so as the world opens up we believe that people will have even more confidence and more conviction in a using market would be and we think we're well positioned because.
Does what the pandemic did tell us as a those companies who were at a depth of using a software and data thrive because everyone had to become a digital first and so proficiency and using a software and data and a and I've said in the past you can't buy a competitive advantage you have to build it yourself and so that means you need to be very proficient in building applications that truly.
Transfer from your business, adding features quickly being able to respond to new opportunities a new threats and it's among the bees a great platform for a naval needed to do that in a very flexible and scalable way. So we think we're well positioned as the world opens up and a and people you know runs a business leveraging software and data.
Wonderful. Thank you so much congrats again, thanks cash.
The next question will come from Pat Wall Ravens with JMP Securities. Please go ahead.
Thank you. So much this is Joe on for Pat just 1 from us.
To see the momentum, we're having with a cloud providers, but I'm just curious how do you think about the pace of adoption and penetration you can achieve in international markets.
Traction youre seeing with Alibaba.
A partnership with Aetna.
The 2 union and cloud partnerships that you announced this flow or both based outside the U S.
Thank you.
So I just want to make it clear you know Alice is available in a regions around the world. It's not just a domestic offerings. So we leverage the points of presence of AWS G. C. P. On Azure all around the world and so pretty much in almost every market except China.
Atlas is available with a few other exceptions and so we have a very wide global reach a what.
But we do recognize that.
A searching on certain regional players have you know deep customer relationships or in some cases like in China and in other places like Russia, there may be a regulatory issues, where we can offer a atlas directly and so by definition, we have to partner with a local provider to enable customers to derive the benefits of Mongo DB.
So I would say our international presence is very strong we have thousands of international customers and a and we partner with a other providers. When we don't believe we can serve the entire market ourselves through Atlas and we've done that with people like O V H in Europe, and a cloud provider and <unk>.
Area and in other places around the world.
Any other questions.
And the next question will come from Matthew Broome with Mizuho Securities. Please go ahead.
Alright, thanks very much.
So just in terms of your enterprise advanced customers a.
To what extent are you thinking about potentially promoting on accelerating the migration of those accounts to Atlas, where it makes sense to do so.
And that's a must enable them to start receiving the benefits of a database as a service.
Yeah. So so on our philosophy is to enable customers to run Mongo DB anywhere and so it really depends on the customer's choice about where they wanted to run at a low where they want to run their workloads on why and so for many reasons customers are or happy to self manage among a you'd be themselves using <unk>.
Price advance either matching.
On those workloads in their own data center or self managing those workloads in the cloud and so we're not.
Trying to convince a every customer that's a atlas is the right solution, we're not at all prescriptive about how customers choose among a D. B, we just want to make sure that their needs get that's gets a serve the best way they see fit a.
And a Atlas obviously, there's been a great boon to our business in terms of the growth and in our ability to innovate on Atlas being a cloud services that much easier because we can ship features more quickly and we can get feedback more quickly and those the benefits of that innovation then.
Get driven to our EA customers. So sorry, a customers also benefit from the innovations from from Atlas.
Yeah, I would just add a gift.
Given that we are effectively sales capacity constrained it is much better to have the sales folks a be paying attention to winning new workloads rather than.
Taking a existing workload that we've already won moving it from EBITDA to Atlas unless it's important to the customer and their it strategy.
Okay.
I see thanks, and then on just as Atlas continues to scale to what extent do you expect to be able to drive some some upside to gross margins.
Yes, so from negotiating better economics with you on a heightened scale cloud partners.
Yeah. So I think we've continued to do that over the last several years and certainly if you'd asked me.
At the time of the IPO and so that was a be a majority of the revenue.
You know where do you think gross margins will be I would've guessed, a lower number and so we've out executed relative to sort of a plan and the expectations. There still is a difference you know you we can't make that a infrastructure component zero. So there will be a gross margin difference, but we have made good progress and we'll continue to.
Turned the various efficiency and optimization, you know dials and levers that come across a number of a flavors.
Okay. Thanks very much.
This concludes our question and answer session I would like to turn the conference back over to Dave EDA Cheery a for any closing remarks. Please go ahead Sir.
Thank you Chuck I just wanted a again summarize that we're off to a strong start in fiscal 'twenty..2 again with 39 per cent year over year revenue growth driven by 73% growth in Atlas a.
We're seeing strong traction for Atlas in the enterprise channel as customers want a platform that enables them to innovate and scale quickly.
And third our application did a platform strategy is resonating in the marketplace as customers see among a DBS superior document data model.
<unk> as a viable solution for increasing number of use cases, so we feel very good about the future. So thank you for everyone for joining us and we'll talk to you next quarter take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Okay.
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Uh huh.
Yes.
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