Q2 2022 MongoDB Inc Earnings Call
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Yes.
Good day and welcome to the Mongo DB second quarter fiscal year 2022 earnings conference call. All participants will be in a listen only mode. So do you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on <unk>.
Touchtone phone and to withdraw your question. Please press Star then two please limit yourselves to one question and one follow up. Please note. This event is being recorded I would now like to turn the conference over to Brian <unk> from ICR. Please go ahead Sir.
Great. Thank you chop.
Good afternoon, and thank you for joining us today to review Imago D. B second quarter fiscal of 'twenty 'twenty, two financial results, which we announced in our press release issued after the close of market today.
On the call today are David a cherry, our president and CEO of Mongo, DB and Michael Gordon Margaret M. D. C O M CFO.
During this call we will make forward looking statements, including statements related to our market and future growth opportunities.
The benefits of our product platform, our competitive landscape customer behaviors, our financial guidance and our planned investments.
These statements are subject to a variety of risks and uncertainties, including those related to the ongoing COVID-19 pandemic.
Its impacts on our business results of operations clients.
Or economic environment.
Actual results to differ materially from our expectations.
For a discussion of the mature restaurants certainties that could affect our actual results.
Please refer to the rest are described in our SEC filings, including our most recent quarterly report on Form 10-Q.
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 in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure.
With that I'd like to turn the call over to dish.
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 company update.
Before diving in I want to share that today marks my seventh anniversary long D. B I'm incredibly proud of how much progress you've made over the past seven years, we went from being a small private company with an interesting technology to disrupting one of the largest markets in all of software along the way we changed how open source software is licensed we.
Produced a new cloud service that required us to both partner and compete with the largest cloud providers and we grew revenues twentyfold with a compound annual growth rate of over 50%.
I'm incredibly grateful to all the amazing people among the D b and to our customers and partners around the World who made this happen as proud as I am of the Amazing journey, we've had I'm, even more optimistic today about our opportunities ahead.
Looking quickly at our second quarter financial results, we generated revenue of 199 million, a 44% year over year increase and above the high end of our guidance.
We grew subscription revenue, 44% year over year Atlas revenue grew 83% year over year and now represents 56% of our revenue and we had another strong quarter of customer growth ending the quarter with over 29000 customers.
Businesses across nearly every nearly every industry I realize that in today's highly dynamic global markets speed of development as a meaningful competitive advantage.
Businesses that can develop software faster are able to improve their products faster and ultimately grow more quickly than our competition. We believe our strong second quarter results are a clear indication that customers are among them to be that's a critical platform to accelerate their digital innovation agenda.
Customers of all types of choosing among them to be because they can develop so much faster using our platform to build new applications and re platform legacy applications across a broad range of use cases to drive their business forward.
Fundamentally monkey bees application data platform offers three intrinsic advantages first marketing bees document model is designed around how developers thinking code. Unlike legacy data technologies. This enables developers to [noise].
To be far more productive and build applications faster as compared to any other technology.
Second mongering bees document miles, it's a super set of other data models.
<unk> key value time series graph and other kinds of data relationships can be easily created using documents.
The document model enables marketing be to address a wide range of use cases and reduces the need for customers to use niche technologies that only serve a single purpose.
Third marketing bees designed for performance and scale with long to be sophisticated capabilities to replicate manage and distribute data at massive scale organizations increasingly choose among them to be to address the most demanding requirements.
Legacy technologies are fundamentally not designed for today's scale and performance expectations, requiring developers, who spend an enormous amount of time working around their architectural limitations.
The continued success of Atlas shows that speed is of Paramount importance to our customers.
Atlas is the best way for customers to enjoy the benefits of our platform as the time to value can literally be only a matter of minutes.
Alex had another excellent quarter accelerating to 83% year over year growth well approaching half a billion dollar run rate.
We also had another strong quarter of Atlas customer additions from self serve to enterprise customers.
Our second quarter results give us even more conviction to continue investing in both our product portfolio and our go to market initiatives, starting with go to market. Our field sales team is increasingly being pulled into higher level strategic conversations at the C suite of the largest companies in the world and we are adjusting our approach to more effectively serve that audience.
Last year, we experiment with increasing our focus on our most promising customers. Our hypothesis was that by going deep into an account with more resources. It would position us more strategically and allow us to penetrate the account more quickly.
Those investments produced excellent returns and most accounts that ran this experiment grew faster than we expected. This is giving us confidence to expand as deep a coverage model to more accounts. This year, while also focusing on expanding our field sales capacity in all regions.
Our inside sales team is firing on all cylinders and had another great quarter.
The strong product market fit of Atlas for this channel along with the changes we introduced last year to make it easier for customers to start using Atlas I've had a positive impact.
Given the results we are focused on expanding our inside sales capacity in our regional hubs around the world to capture more of the large opportunity we see in this channel.
Finally, turning to self serve this channel as a cost effective way to acquire a large number of customers and is a critical lead generation vehicle for our sales organization. We are focused on increasing our sophistication on digital acquisition and product led growth techniques to increase the top of funnel and optimized mid funnel conversion rates this isn't it.
Iterative process, but a lot of experimentation that is yielding promising results.
Turning to our product roadmap, we continue to invest both to extend our lead in the core database space as well as to mature and grow our merchant products.
Margaret you don't live our user conference held in July we made significant several significant product announcements that further advanced our vision.
We focused on two themes ease of use and expanded the capabilities of our platform to make it more compelling for customers to standardize on not going to be.
First on ease of use.
Making it easy for developers to use and get value out of market has been the core of our DNA since the founding of the company.
Our announcement on Atlas Atlas takes ease of use and developer productivity to the next level with surplus customers can get started with marketing be without having to pick a specific machine type or size. The application connects of Atlas and we handle the elastic scaling of compute and storage seamlessly whether an application scales quickly, whereas spiky traffic patterns.
This dramatically simplifies life for our customers because they no longer have to do capacity planning or manually intervene to adjust the size of the deployment.
We expect sort of Atlas to drive more customer demand because getting started on and using Atlas just became even easier.
Next for customers, who want to benefit from our shorting features to manage a massive amount of data we introduced library short and as a reminder, a sharp as a method for horizontal distributing data across multiple machines.
Marketing would be use of shorting to support deployments with very large amounts of data and high throughput operations to prevent any single machine from becoming a bottleneck.
Previously when a customer wanted to short data the customer had to pick a schottky essentially the parameters that would be used to partition of the data.
However, we know in applications requirements can change quickly make it more beneficial to partition data using a different sharkey.
Richard allows users to easily change the sharkey when this happens this feature which is not available on any other platform will make it far easier for customers to start using our short and capabilities and seamlessly redistribute data when their requirements of their application or the business change.
Finally, our announcement in version API addresses a structural issue with all databases historically when a new database version is introduced there are feature changes that can break existing application functionality and creates significant reworked for development teams invariably some organizations prefer to stay on an older version of the database to avoid this risk.
But the downside is that they they then cannot take advantage of new features available in the latest version.
Our introduction of version API solve this problem. The version API feature lets you upgrade your among would he be server at will this groundbreaking breaking capability allows customers to decouple the application development lifecycle from the database lifecycle. So they only need to update their application when they want to introduce new functionality not when they upgrade the.
Yes.
If all the features we announced that most of you that live version API. It got perhaps the most enthusiastic customer reception.
Regarding the second theme.
We remained focus on expanding the capabilities of our platform because customers consistently tell us that they want a modern general purpose platform that precludes the need for single purpose technologies in order to reduce backend infrastructure complexity and increase the speed of innovation.
We introduced reintroduced native time series support across our entire platform time series collections clustered index thing in windows functions, making it easier faster and lower cost to build and run applications like Iot.
Well, we were able to address this fast fast growing use case in the past with these new features that we can compete for even the most demanding time series workloads.
We also added depth of functionality across our emerging products, perhaps most notably in Atlas search, we're enhancing search with custom synonyms and function, scoring which allow e-commerce customers to provide more relevant and geographically targeted results. We believe these features will make Atlas search an excellent solution for even more use cases.
Finally, we also recently announced that we achieved fed ramp ready status. This designation allows us to capture the substantial demand for marketing the Atlas across federal and state government agencies, and Ics that serve that market.
Our recently announced product enhancements enabled customers to use them all going to be for an even broader set of use cases and represent a meaningful step forward on our journey to deliver the pre eminent modern application data platform.
Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the second quarter.
Jetblue is new York's hometown airline with one with over 100 destinations across the U S Caribbean and Latin America, and between New York and London.
To overhaul their core E Commerce, App Jetblue chose the montney be application data platform marketing as flexible data model allows jetblue to build dynamic customer experiences when their ticketing application as well as predictive analytics in real time.
Data robot as a leader in augmented intelligence delivering a trusted AI platform that empowers organization to make better data driven business decisions faster in that scale.
Among dps power of the company a SaaS platform from its inception, and this quarter did a robot migrate from I'm going to be community had addition to enterprise advanced for compliance encryption features and support.
Our enhanced relationship with health data robot continues to innovate and support its global customer base as users are using AI to transform their businesses.
Roma capital is the governing body for the city of realm and managed it services across transport welfare and education for over 4 million citizens in a bid to drive a new smart city approach real much as long as it would be it's part of the underlying data platform to modernize its entire content management system and drive a new comprehensive.
All of your environment for development as.
As a result, Roma jumped from 15th place to fourth and the latest Italian Smart city ranking and was able to bring new online digital opportunities to its citizens.
P T vision that international or OVO, a leading Indonesian payments rewards and financial services platform relies on longer they beat the pirates core digital payments platform, but serves over 115 million devices as part of our strategic initiative to market all of its database workloads spread across multiple databases.
And hosting platforms OVO chose marketing Atlas enterprise to consolidate its tech stack and moved to Google cloud.
I expect the monetization will increase developer productivity accelerate new feature release cycles, and consolidate workloads, making the over infrastructure future ready.
In summary, we had another excellent quarter, our customers want to innovate faster and are looking for a scalable general purpose application data platform that will give their developers the freedom to move quickly among the bees increases seen is uniquely positioned to fulfill this need with that I'll now turn it over to Michael.
Thanks, Dave as mentioned, we delivered another strong performance in the second quarter, both financially and operationally I'll begin with a detailed review of our second quarter results and then finish with our outlook for the third quarter and full fiscal year 2022.
First I'll start with our second quarter results total revenue in the quarter was $205.0 million up 44% year over year.
Subscription revenue was $195.0 million up 44% year over year.
And professional services revenue was $11.0 million up 27% year over year.
We exceeded our expectations in both Atlas and enterprise advanced, but our outperformance was particularly notable in enterprise advanced.
As you know <unk> has a more immediate impact on revenue due to the fact that under ASC 606, we are required to recognize the term license component of revenue upfront.
Overall Atlas is strong performance continues to be the largest contributor to our growth Atlas grew 83% in the quarter compared to the previous year and now represents 56% of total revenue compared to 44% in the second quarter of fiscal 2021, and 51% last quarter.
During the second quarter, we grew our customer base by over 2200 customers sequentially, bringing our total customer count to over 29000, which is up from over 20200 in the year ago period.
Of our total customer count over 3006 hundred are direct sales customers, which compares to over 2005 hundred New York go period as a reminder, our direct customer count growth is driven by customers, who are net new to our platform as well as self service customers with whom we now have a direct sales relationship.
The growth in our total customer count is being driven in large part by Atlas, which had over 27500 customers at the end of the quarter compared to over 18800 in the year ago period. It is important to keep in mind that the growth in our Atlas customer count reflects new customers to Mongo DB. In addition to existing E I'd customers, adding incremental Atlas workloads.
We had another quarter with our net air expansion rate above 120%. We ended the quarter with 1126 customers with at least $100000 in air or an annualized <unk>, which is up from 819 in the year ago period. The continued strong growth in customers with $100000 or more in a R. R. As 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 income statement I'll be discussing our results on a non-GAAP basis, unless otherwise noted.
Gross profit in the second quarter was $151.0 million, representing a gross margin of 72%, which is consistent with last quarter and consistent with 72% in the year ago period.
Overall, we were pleased with our gross margin performance, which was only seeing a modest impact from Atlas as it becomes a bigger portion of our revenue despite its infrastructure component.
We continue to expect that we'll see a modest reduction in overall company gross margin as Atlas continues to grow as a percentage of our revenues.
Our operating loss was $16.0 million or a negative 6% operating margin for the second quarter compared to a negative 7% margin in the year ago period.
Our outperformance versus our operating loss guidance was driven primarily by revenue outperformance.
Net loss in the second quarter was $17.0 million or 24 cents per share based on $67.0 million weighted average shares outstanding.
This compares to a loss of $19.0 million or 22 cents per share on 58.4 million weighted average shares outstanding in the year ago period.
Turning to the balance sheet and cash flow after raising almost $900 million in a follow on equity offering during the quarter. We ended the quarter with $9.0 billion in cash cash equivalents short term investments and restricted cash.
Operating cash flow in the second quarter was negative $27.0 million after taking into consideration approximately $11.0 million in capital expenditures and principal repayments of finance lease liabilities free cash flow was negative $29.0 million in the quarter.
This compares to negative free cash flow of $15 million in the second quarter of fiscal 2021.
I'd now like to turn to our outlook for the third quarter and full fiscal year 2022.
For the third quarter, we expect revenue to be in the range of $202 million to $204 million, we expect non-GAAP loss from operations to be $25 million to $23 million and non-GAAP net loss per share to be in the range of 42 cents to 39 cents based on $70.0 million weighted average shares outstanding.
For the full fiscal year 2022, we now expect revenue to be in the range of $805 million to $811 million for the full fiscal year 2022, we now expect non-GAAP loss from operations to be $67 million to $62 million and non-GAAP net loss per share to be in the range of $21.0 to $14.0 based on 64.
One 6 million weighted average shares outstanding.
Summarized them I'm gonna be delivered excellent second quarter results, we're driving high levels of growth at scale, driven by our large market opportunity and strong execution. We continue investing to capture the large opportunity ahead of us we're seeing attractive returns on those investments and we're excited about our positioning for the future with that we'd like to open up to questions operator.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
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We ask that you please limit yourself to one question and one follow up there and at this time, we'll pause momentarily to assemble our roster.
And the first question will come from Sanjay Singh with Morgan Stanley. Please go ahead.
Uh huh.
Thank you for taking the.
The question and congrats on another really impressive quarter.
Dave maybe I wanted to understand the Atlas.
On a sequential dollar basis, you almost doubled the amount of revenue that you added in Q1, if we can sort of unpack that along a couple of different buckets sort of existing customers sort of expanding with atlas versus migrating either enterprise advanced another database versus contribution from net new and.
<unk> customers can be added in the quarter, but also maybe the customers that you have added last year, which that you saw a big uptick if you can sort of unpack the sources of growth that was something that would be helpful.
Sure. So first of all what I'd say is that customer additions remain robust across all three channels. So we're seeing strength in all geographies geographies, including places like India and Latin America.
And we frankly also see strong enterprise adoption of Atlas Atlas is increasingly seen as a destination for mission critical applications and as we said last quarter over 600 customers spend north of $100000 on Atlas alone.
[noise] and self serve remains a critical channel and our customer acquisition vehicle. So over 50% of our Atlas air or was from customers who was originally sourced in the self serve channel I'd also say that multi cloud is a huge selling point for Atlas multi cloud improves our resilience and as you know cloud providers do have outages and they can.
And leverage the best features of each cloud provider and avoid locking.
In terms of like breakdown of where these customers are coming from I think I would just say, we're seeing healthy growth in both new customers as well as expansion of existing customers and yes. The customers. We've acquired you know over the last few quarters, our growing expansion rates for Atlas are very strong and so all of them are essentially contributing to the growth of Atlas.
I would just add maybe sanjiv from perspective, the two thoughts one on a year over year.
Pes are obviously Q2 was an easier Atlas compare given the COVID-19 impact that we experienced last year that was that sort of broad based but modest impact that we saw a resulting in slower expansion from accounts and then sequentially to your point. There is there is some seasonality in Q2 tends to be meaningfully stronger than thank you wanted to.
You see that showing up in the numbers as well.
That's great context, Michael and then as my follow up on game longer BB, five Dato versus Florida.
Any way sort of you could sort of frame out how significant this release put out was that was a major release right and there's a lot of key enterprise features multi document acid support you know sort of a game changing at least at least in my view, how should we think about buybacks versus before not a cycle.
Multi question I actually haven't thought of but as you said four data was a seminal release for us because it didn't produced a big feature of with multi document acid transactions, which at the time was the biggest objection for enterprises or anyone using wanting to use among them to be for a mission critical use case that objection was off.
So you've taken off the table, but I would say with five dot O is we're just continuing to double down on it one expanding our platform obviously with all the additions that we're making especially with native time series support and we're also making it far easier for customers to use them all going to be as you can imagine with over 29000 customers we have customers have.
All shapes and sizes of all levels of sophistication and we really want frankly and that this is in our DNA, we really want the database to get out of the way of people getting their work done and so you just want to make it really easy for people to use Mongo, DB and and and obviously Atlas is the best way to expose a lot of the features.
And so I would just contrast, I would say four data was all about convincing people that were truly could be a general purpose and mission critical platform and five data is all about expanding our platform and making them all going to be even more easy to use so that people can get started on long it it would be more quickly.
It makes total sense, Dave Congrats on a stellar result, thank you. Thanks Angie.
The next question will come from Raimo Lynch Chau with Barclays. Please go ahead.
Hey, Thanks, and congrats from me as well can you talk a little bit of balancing what you see out in the field in terms of.
Customer interest to do more stuff again, so I'm looking at your self service Atlas started to kind of reaccelerate on growth, but we're coming out of there.
They make what are you seeing in terms of pipeline build and appetite for bigger projects coming through again and I had one follow up for Mike.
Were clearly seeing more and more demand. So one of the things that we talked about in the prepared remarks is that we had identified a set of promising accounts and said what can we do to grow these accounts, even more quickly because we knew that they they liked it to be but a percent of the total database spend was still quite small and so when we deployed more resources and really had one.
<unk> focus on that account only we suddenly saw the the level of focus.
The incremental resources really drive great results. We started those account started drawing more quickly and so we're starting to do that even more with some of our other more promising counts again, it's a small percentage of our total customer base, but these are probably some of the most sophisticated and demanding customers and we obviously careful about who we choose.
These people are are predisposed to use Atlas, that's what we've kind of negotiated some sort of agreement with them to use our cloud services. They already have some existing Atlas spend. So we know we have a some strong champions in account, but we also know that there's some massive upside in that account so for the most demanding customers.
Seeing really really strong signals and this is giving us confidence to expand this program. Even further this year as well as into next year. So that's that's kind of at the top of the food chain and I would say that we're even seeing you know digital native companies I S vs, who are very very demanding requirements.
Continues to use either choose market b or double down among them before their platforms and we're really excited about what that means for us long term.
Okay, Perfect and then the follow up for Michael just a if I look at your cash position now, it's obviously kind of after the action last quarter. It kind of a bit can you just talk a little bit about your philosophy around cash how much you're going to carry you to run the company et cetera. Thank you.
Sure Yeah. Thanks, obviously, the cash was bolstered in part by the equity offering we did during the quarter, we talked about that as you know opportunistic financing I think we just want to make sure that we have you know the full degrees of freedom that we think makes sense in terms of maximizing the long term opportunity and do sort of.
And the business as long as we continue to see good returns from that so I think that's probably the key points there okay.
Okay perfect. Thank you congrats.
The next question will come from Kash Rangan with Goldman Sachs. Please go ahead.
I'm sure you'll get very good returns on cash Ah. Thank you so much rigor.
My question was on Atlas that looks like.
The adoption curve for Atlas is turning out to be.
Even more aggressively positive than than one would have expected given that it's it's cloud deployment. If you could just compare and contrast, the kind of workloads that Atlas is able to take on relative to its lifeway Street versus the core Mongo DB platform at one of the things that have surprised you with the adoption curve and.
What does this mean for where this business could look like in the next three to four years in terms of the scale and scope of customers you could take on.
Had versus.
The Standalone Mongo DB on Prem database sorry.
Thank you so much.
Yeah. So one of the key differences with Atlas and say deploying on Prem is that developers can move very very quickly without needing their operations team to set up the interest underlying compute and storage infrastructure to get going.
So and by definition the cloud has you know elastic scalability and.
And so people can you know increase their their their instant sizes or the capacity very very quickly without having to go back and ask the ops teams to build out more infrastructure. So the ability for development teams to move very very fast as it is even more pronounced on a on a cloud service like Atlas.
Then it is on Prem the second thing I would say is that Atlas has clearly become a mission critical platform in the early days. There were probably people were you know obviously being a new service and people didn't know what to expect you saw more Devin test workloads, perhaps you know peripheral tier three workloads moving onto Atlas, but.
As people got more and more experience with Atlas as we added more enterprise features to Atlas people became increasingly more comfortable and now we're seeing you know very very large and demanding applications move to Atlas even from some of the more conservative mainstream organizations out there. So so what we're really seeing now is in there.
This adoption of Atlas at scale.
Got it so there's not a limiting factor at itself as it relates to Atlas as a platform, but we have everything that you get with Mongo DB plus more deployment flexibility and the ability to scale. So on it is there a point, where atlas becomes even more scalable even more functionally fleet than the core Mongo DB.
I think we said this and this happened a couple of years back I mean, we got to a feature parity on Atlas a far faster than we expected and now actually we lead new feature development of Atlas first and then we catch up on enterprise advanced and so I would say that our in terms of feature completeness and scalability.
This is the best solution in the marketplace today, and I think you'll see us continue to invest aggressively in Atlas because every customer that we know even the customers who are predominant on premise. They know that the benefit of using mom going to be is that they can start on prem, but they have a very seamless path to the cloud.
Theres no forklift upgrade Theres no rewrite of the application code. It's just a very seamless migration path and so there's different customers based on the regulatory <unk> regulatory environment, they're in compliance reasons, sometimes even cultural reasons. They may be moving more slowly, but every customer has a very a clear migration path to the cloud and we believe the.
Ultimate destination definition will be Atlas.
Congrats Dave Thank you so much thanks Kash.
The next question will come from Brad Reback with Stifel. Please go ahead.
Oh, great. Thanks very much.
Jeremy as you think about the last couple of years, you've obviously introduced a bunch of new products. So as we think of that where we are today or are those products, a meaningful amount or a meaningful contributor to new consumption that we've seen quarter over quarter year over year or is that really yet to come.
Yeah, So Brad I think that's a good question again I just want to remind you and everyone else that the new product usage. The revenue shows up as Atlas revenue, but let me just give you a little bit of color on each of the products and what we're seeing on search what's becoming very very clear is that customers are really really attractive to be.
Able to combine a database with the search engine is one endpoint and in the end as a managed service that becomes very very attractive. They don't want the disparate Mongo DB deployment, and then some sort of elastic of solar deployment to do that on one platform becomes really attractive and we're seeing you know really interesting uptick there on <unk>.
Sync, which by the way think was just G. Eight in February we're seeing.
We're seeing some really interesting customer use cases in particular in retail and logistics, where people want to do inventory management and logistics.
And we're seeing some really interesting customer traction there.
On the data Lake product, we're seeing a lot of interest, especially from some of our larger customers to basically improve the economics of keeping large volumes of data accessible because of challenges that either they have to migrate the data completely but then you can't really access it or you have to delete the data and with online archive.
If you can actually get the benefits of having all the data, but in a very cost effective way and we also see that people are building more and more interesting smarter applications, where they're leveraging analytics to build better customer experiences and so as that becomes more pervasive you know you'll see use cases like real time analytics and so on so forth becoming.
More and more prevalent and then what I would say is that even though time series is new we've had some interesting traction on time series again, you know customers attracted to rather than buying some sort of bespoke solution being a part of a single platform and we can leverage the existing market of your installed base to go after more business and so.
So I would say that's the color I'd provide in terms of new customer traction and we're quite pleased with how things are progressing.
That's great thanks very much.
Yeah.
The next question will come from Brent bracelet with Piper Sandler. Please go ahead.
Thank you good afternoon sticking with Atlas threat here, obviously in the third quarter of accelerating growth if I look at kind of customer add metrics versus usage metrics. This quarter. It looks like a more material uptick in usage. So I guess first question what drove the step up in Atlas usage. This.
Quarter, I think you talked about 600, <unk> hundred thousand plus kind of enterprise type customers spending on the platform as it must be enterprise or are there. Other factors here at play and then one quick follow up.
Yeah, what I'd say is that the performance of Atlas is strong across all the three channels, but I think I would add that the enterprise adoption of Atlas is really you know in particular is something that should be called out because we're seeing customers now becoming very comfortable in deploying mission critical applications on Atlas with very low demand.
<unk> requirements and and I think that's that's a big part what's driving our growth and I would also say that are you know multi cloud is becoming increasingly important customers really like the fact that they can protect and preserve their investments in the application, even though they may end up moving cloud providers.
Or maybe running in app across different cloud providers and Ah I would say that we're seeing some really interesting demand in some regions like India, and Latin America, especially in our mid market channel. So that gives US you know I'm just gives us more conviction about how big of an opportunity we're going after.
Great and then Michael for you I know.
Oh yeah.
Oh, sorry, let me just add on one thing and then happy to cover you know your your question I, just I think people get the year over year piece, given the easier compare but I think the I just want to underscore that sort of sequential piece, which I think is really important and the seasonality of Q2 being stronger than Q2 than Q1.
And when we look out to the second half of the year, we see a tougher compare for Atlas in the second half sorry go ahead got it so the seasonal factor help there. So my question is still on Atlas. It's just on the gross margin side I know overall gross margins downtick slightly but if I look at kind of gross with subscription gross margins.
We're well north of a 75% for the last three quarters, even with a pretty material mix shift to Atlas. So.
Do you think that with Atlas over half of the revenue mix that said, 75% subscription gross margin is sustainable.
Yeah. So I don't think we're prepared to call a bottom yet, but we've been exceptionally pleased with how we've executed against the strategy, they're still sort of additional opportunities and well. We're very pleased that Atlas is 56% of revenue you know there's still a lot. There still is a margin Delta you know between the two and a healthy chunk of the revenue and so we've got you know more.
That we need to do and want to do on Atlas gross margin, but we've you know so we're certainly not at a bottom, but we've been really pleased with the progress to date.
It sounds good thank you.
The next question will come from Jason Ader with William Blair. Please go ahead.
Yes. Thank you.
Dave.
Do you have a sense of how you're doing versus the cloud players I mean, obviously your results speak for themselves, but do you track win rates, there and any any just color commentary on your competitive position versus some of the house databases from the cloud providers.
Well, if you know anything about the marketing would be culture, we're very focused on serving our customers, but also being quite aware what our competition is doing and I'm pleased to report that our win rates against the competition are very very high.
Against both the Standalone companies as well as the clones being offered by the cloud providers. Our win rates are really really high as Ive said in the past. Our biggest issue is is deals that are going down that we're just not aware of and that's those are those are deals that keeps us up at night, because when you go head to head our win rates are extremely high.
Alright, and then just a quick follow up on the multi model capabilities of the platform and I know you have native time series now I know you have grass and some other.
Data models.
Do you have a sense of how much of your customer base actually uses some of those capabilities can you track that.
Hum.
In general we can and obviously with these new capabilities. We can track usage one of the benefits of a cloud service because you get much better fidelity in terms of what customers are doing on your platform, yeah, and and and two to underscore. The point you. Just made is that the point that we make to our customers is that rather than having a bunch of bespoke solutions.
And some of our competition has like 13 or 15 different database options you know what people realize after the fact is that the challenge of managing learning managing and supporting all of these different technologies, let alone dealing with how to.
No inquiry all that data as you know synthesize all that data back up all that data becomes our onerous management attacks and so being able to consolidate on a single platform becomes very very attractive which is why we're seeing so much interest in search which is why we're seeing so much interest in time series, even though it's very early and why we think that Oh.
Our platform strategy is really working.
Thanks, Good luck.
Thank you.
The next question will come from Tyler Radke with Citi. Please go ahead.
Thank you good evening.
Wanted to start David you made an interesting comment in your prepared remarks, just around higher C level engagement and I guess couple of questions there.
What specifically are you doing to support that is it is it hiring more experienced traditional enterprise sellers and then secondly, what do you think is driving that.
You know as it is at Atlas is it I'm just just overall standardization as they as they look at legacy migrations just to expand on that comment would be helpful. Thank you.
Yes, sure. So you know one of the things that we learned about the buying behavior in the spaces that people make decisions workload by workload. So every time you build an application every time you want to reply from application you have to make a decision about what database you want to use so it tends to be when you're in an account. It you tend to have a bunch of micro decisions about.
All of these workloads and you have to almost win them workload by workload the benefit of going high is that ultimately your goal is to become declared a standard where people don't need permission to use mongo DB to build an app. They can pretty much choose marketing be quote unquote, it's a product off the shelf that Jews and as part of the standard architecture.
<unk> been blessed and approved by that organization. So part of the value is going high is it's accelerating the path to being declared a standard and going high also allows you to be positioned very differently than just being you know yet another database that accompany uses so understanding helping them understand how we can really help them accelerate the business. How we can help them you know.
Seize new opportunities to respond to new threats and that it's a real compelling competitive advantage to build applications among VB versus any other alternative so so in terms of the people. We have we have you know we hired some outstanding sales salespeople are on.
And sales leaders and so obviously, we leveraged the whole organization up into and including the C level executives. You know for example, see her awesome, our chief product Officer, Mike Mark Porter, Our Chief Technology Officer, and myself and others get involved in strategic conversations Cedric Pasha CRO as its outstanding.
At knowing how to kind of build and scale. These types of organizations and we have very strong leaders.
And different theaters of the world, who know how to do this really really well and I would say in terms of why are we being invited to these conversations one I would say you know people are starting to get more and more familiar with long would he be there's more and more evidence of the value. We can provide so one is time they get more experience. Among do you begin to get more confident second half.
I'd say our feature our product portfolio has expanded quite significantly so that we can address.
More and more use cases.
And third.
Obviously Atlas has really changed the game where people can just deploy moms to be far more quickly than doing it thoroughly on premise and so all those things have kind of been accomplished events for us to see that.
The acceleration in these accounts.
Thanks, Mike.
Michael I'd follow up for you is I think in an earlier question you referenced some more challenging comparison.
In the second half.
On a sequential basis on Atlas.
I was just curious if you could expand on that I you know I think if we look back at least on a on a dollar basis added over the last few years you've seen.
You know similar if not even a little bit more kind of net new Atlas revenue added in in Q3 than in Q2.
So just curious if you could expand on that and how we should kind of think about the shape of the Dallas trajectory for this year.
Yeah, So it's less about a sequential and there's more commenting that the first half of the year in the base period of the compare was it an easier compare given the COVID-19 impacts that we saw at the end of Q1 and then in Q2. So it's really more of a year over year compare question then a sequential comment.
Okay.
The next question will come from Karl Keirstead with UBS. Please go ahead.
Thank you I've got the two Atlas related questions.
A lot of developers are building apps.
For Azure and GTT I think we all understand that the vast majority of Atlas revenues are on AWS could you give us a bit of a progress report maybe on on the mix from Atlas on GCT and Atlas on Azure. Thank you.
Yeah, I I don't believe we break out the exact details, but our our business tends to mirror the market share of all three cloud providers I would say D. C. P. It probably is further ahead in terms of of or at least we're further ahead with GCB relative to their market share, but in general our business tracks along the market share of the cloud.
I would say GCB and I think what what really differentiates you know one cloud provider versus another is is that a people are recognizing that I'm moving on Atlas workloads to their cloud actually has ancillary benefits for that cloud provider that customer ends up consuming other services and the <unk>.
Dollars that they spend with us they spend multiples of that but the with the <unk> and cloud provider. So in particular, Amazon and Google have been more aggressive in partnering the field at the at the sales level theres more partnering going on and and I think that's yielding.
Oh, you know more and more deals and and I think Microsoft is starting to see the potentially the benefits of doing that as well, but a little bit further behind.
Got it that's helpful and then maybe a second Atlas question.
The Azure Cosmos DB vulnerability got a decent amount of attention over the last couple of weeks I'm. Just curious whether you sense any change in focus on cloud database security exposures and and how and if that's a differentiator for Atlas.
Yeah. So it's a good question I mean, obviously this that news was quite recent in terms of what happened with the cosmos the breach and just just to level set you know a security company discovered that was possible to gain you know completely complete unrestricted access to accounts and databases of all the azure customers, including.
Their flagship product Cosmos DB and this vulnerability was introduced through integration through its Jupiter notebooks service I would say that our you know we have a very robust focus on security. Our products are you now have a bunch of security certifications, including socks too I saw it.
97001, HIPAA P S I et cetera, and we have layers of defense of controls and triggers alarms in the event of suspicious activity, we spend a lot of time on product innovation in the area of security, including releasing features like client side field level encryption, which allows customers to store data in Atlas without there being any one.
Side of their organizations can even see the data.
Utilize external security firms to perform regular penetration testing same way an attacker wood.
And.
We haven't had a coordinated disclosure program, where we encourage independent security researchers to contact us if they find a security issue in our products and we reward them accordingly.
So we found tremendous value and an output from our engagement with the external security consultants researchers as well as our internal team and controls around vulnerability and discovery management and thankfully, we have not had a breach of market would be atlas, but we're very very focused on security. So it's a core tenant of our offering.
Okay. Thank you for that.
The next question will come from Pat Wall Ravens with JMP Securities. Please go ahead.
Oh, great. Thank you and congratulations on the quarter, Hey, David If you look at like the five major use cases for databases transaction processing data warehousing data science stream processing operational intelligence.
Where do you see the most opportunity for Mongo DB.
Well clearly I route start off in transaction processing, but we definitely you know we are.
We definitely see a lot of opportunity in our what you call the operational intelligence or what we'd say is analytics and real time analytics afford the application, we're not trying to be a data warehouse and and and and you'll see us continue to invest more in that area.
And what we see is that it's it's a massive market and we're well positioned and and.
We can do to expand our platform to address a wider variety of use cases, and and what I would say is that what customers are clearly telling us that they just don't want to use a net new technology for net new use case that they want to be able to run more things on an on platforms.
And they wanted to get the benefits of all the best of breed solutions out there, but they wont be able to do that on a fewer set of platforms.
And that's where I think we are really differentiating ourselves because we truly are a general purpose mission critical platform. When you look at the size of our customer base. The variety of use cases that customers run among D. B the types of customers that use them I'm gonna be it becomes very very clear that people can use us for a lot of different things.
Great. Thank you.
The next question will come from Jack Andrews with Needham. Please go ahead.
Good afternoon, and thanks for taking my question I wanted to ask a bit more on the five dot one release.
It seems to be one of the important features as you've talked about the ability to have a faster.
Releases.
Between major leases. So could you just flush out for us what should we be expecting in terms of you know how how do you anticipate.
You know priorities and focus on on what do we lease a win.
Well, we have a pretty rigorous approach starting in all of our product management organization at least that process, but we take inputs from obviously, our sales team our customer support team our technical sales organization as well as I know kind of we.
We do have some top down analysis in terms of what are the areas that we want to get into obviously you also look at what the competition is doing to understand where they are getting traction and whether or not and that informs our view in terms of you know how we would want to decide what products are built in and what what cadence and obviously.
You know in our space, it's not like you just build a property move on you know you come out with a N.
N V. P. A release and then you you know introduce new features or or basically mature that product over time, if you look at even Atlas.
Atlas only came out five years ago and the level of feature development Atlas, even though it was one product has been enormous and so so these proxies tend to mature over time and so so there's a there's always some debate about new features and capabilities versus you know maturing and and in strengthening the existing set of products in this.
There's a it's obviously a judgment call on to some art as well as science in terms of how we handle that and and I would say to your point with the cloud service, we can introduce new capabilities far more quickly than say an on Prem version. So we have gone to a quarterly release cycle, which allows us to introduce new features fix bugs as that much faster.
Now folding in all the new changes and so forth it into our on Prem product once a year, so and so that really allows us to continue to innovate fast, but still be able to address the needs of the organization and make sure customers can consume our marketing bees capabilities at the rate and pace that they want to.
Actually the color just as a follow up question could you update us perhaps on progress with the systems integrators and Miss your way to frame. The proportion of your deals that are you know, maybe a psi driven or rsi influenced these days.
Yeah, we don't break out that in particular, but I would say a meaningful percentage of our business is done through some sort of partner those partners can come in a variety of flavors, we already talked about the cloud providers to your point. The systems integrators are another key cohort of partners that we work with we also work with a bunch of ice vs and they could be either sell two or sell through kind of relationships with the Isps.
And so so our partners play a big role we have a dedicated partner organization focused on our partners.
And they play a critical role in kind of helping us expand our reach and accelerate our deals as well as shorten the cycle time to close deals and with regards to the sides. Historically, we've done business with every major ESI in the industry and so I can't think of one large outside where we haven't.
Done some business with where obviously picking and choosing the partners. We work with where we think we can have the biggest impact but we're also working with some boutique partners, who have a real mongo DB expertise, who bring a you know some extra teeth, especially since many customers may not unless you have all the marketing skills that they want.
In their own organization and they also provide a valuable role in helping us grow our business.
Thanks, and congratulations on the results.
Thank you.
The next question will come from a tie Kindran with Oppenheimer. Please go ahead.
Thanks, Nice numbers guys just one from me, Dave maybe you could talk about internationally you haven't talked about your international makes them how they outperformed the quarter, maybe you can kind of recap for us how patterns internationally are similar or different than they are here in the U S. And also is your strategic.
So you are having with customers now here in the U S is that also something that applies internationally or that's more of a later cycle relative to where we are here in the U S.
So I would say our business is frankly is strong across the globe are obviously.
You know different theaters or the size of the business is different but we're seeing significant demand across the globe I'll start with Europe. Historically, we've been very strong in northern Europe in particular, the U K, but we've really expanded very aggressively to Hum Southern Europe, France, Italy, Spain have become <unk>.
Really really strong markets for US are we've also expanded quite aggressively as you can imagine to Germany, and northern Europe, and and we're feeling really good about the opportunity. There in fact, we're trying to hire as fast as we can in terms of Asia. We've seen you know burgeoning demand coming out of India and southeast Asia. It was funny.
You know our sales leadership and when we first launched Atlas argued that Atlas the value proposition would make a lot of sense since the cost of labor was a lot lower in India.
Atlas the value proposition would wouldn't make as much sense because people just hire their own.
Our opt in database administrators, well it turns out you know people, who value speed people valley being able to innovate and people valley being able to offload undifferentiated work. So Atlas is going on like Gangbusters, Our India team has been crushing their numbers that we're trying to expand that team as fast as possible same in other parts of southeast Asia, and China, Obviously, we can't.
Offer Atlas due to regulatory constraints. So we decided as you know I think you may be aware that we have relationship with the with both Alibaba and Tencent and Alibaba about where are you in your two of their relationship and that relationship going really really well and.
And Tencent has just started to heat up.
As you know that there's some.
The government is taking you know.
Yeah, there's a little bit more scrutiny about what the tech companies can do but we're not seeing that in our business with those partners and then in terms of Latin America are while we don't have a huge breasts Latin America, we're seeing a lot of demand for it. So we're trying to service that through our inside sales team and our self serve channel and we're starting to deploy more resources in Latin America. So.
And I would tell you that this market is very large and is truly a global phenomenon.
Very good good luck. Thanks, Thanks for your time.
The next question will come from Matthew Broome with Mizuho Securities. Please go ahead.
Oh, thanks, very much and I definitely appreciate the geographic color there on I guess, it's sort of a similar question in pounds.
Sort of you know customer basket was there any specific.
The change that that sort of particularly outperformed your expectations. So all combating any way you'd like to see.
A bit stronger momentum.
Well I would say, obviously, it's a big market. So as you can imagine our sales teams tend to go you know where the business is we are we tend to not organized by verticals, but that's something that may change over time as we see.
You know getting going deeper in accounts going deeper in financial services going deeper into understanding their particular use cases can have a disproportionate impact on our business. So that's something that we're contemplating but.
But I would say in general you know, we're seeing strong across the board performance marketing is truly a horizontal solution and it's really a function of you know our coverage model and how many people we have in the region and because they're organized geographically they'll go after the the options the way that they think that they can have the quickest impact on.
So you know as you can imagine companies that are more technology sophisticated tend to be really good customers of ours, because companies, who want to build their own custom applications tend to be really good customers of ours, and obviously every new SaaS company Who's coming out you know everything about their tech stack, we want to be part of that tech stacks or.
Putting a lot more focus on those companies because they grow we're the beneficiaries of their growth.
Yeah, I would just add if you like.
And if you are if you think about the Q2 outperformance, we talked about sort of strength across the board. We also talked about how enterprise advanced was particularly strong.
And while sometimes you might map that to certain industries I think even in the vignettes and customer examples Dave pointed out really it depends on how someone's you know what their architecture looks like and how they're going to consume software. So it doesn't perfectly map to the industries are but we had like I said very strong performance in Q2 really across the board product wise, but particularly in our NDA.
And then when we look out for the second half of the year. We don't see that you know we're not counting on that he outperformance when you look at the back half, which obviously you know impacts numbers.
Excellent. Thanks again.
The next question will come from Steve Koenig with S. M. B C. Nikko. Please go ahead.
Yeah.
Okay, Hey, Thanks for squeezing me in guys I'll just ask one question. So I remember back in the day at Oracle win interoperability and portability, where big marketing points for them.
Now now now their applications have all been built and the marketing messages and so important for them, but new applications are being developed in the cloud you know with new databases like Mongo.
Yes.
No.
Database interoperability is great multi cloud is great, but there's a lot of other paas services that apps need to hook into besides database. So can you give us more color on how real multi cloud is today and the customer challenges associated with implementing it and I think the broader question is long term how do you stay ahead of a major cloud vendors too.
Stand a very good chance of being major forces in this market. Thank you very much and I appreciate the squeezing me in.
Yes. So if you talk to any developer they will tell you that the most amount of time and effort that they spend on is working with data. So the database tends to be a place where they.
Spend a particular amount of time, and that's where they have the biggest challenges and that's where we see the biggest opportunities. So while they have to integrate with other solutions and they may have to build a range of micro services every micro services for example will neither database.
And so so while our applications are getting decomposed into small smaller piece parts like micro services. The database still plays a very very important role and so yes, when a customer builds an application. They may tie into other services that the cloud provider may offer, but a big factor in terms of what applications are built how quickly.
We can innovate how fast they can add features is directly correlated to what database are using which is why we win and I would say that to your second question you know compared to the two cloud providers, we have been competing with the largest companies of the world, Obviously Oracle and others in the early days and then you know the cloud providers.
Amazon and Azure, where their own competitive offerings, you know for the longest time and we've held our own and the reason we've held our own is that you know we have a built a very very strong set of IP with the document model, it's proven to be the best way to work with data.
Even though it's an open source product, we have a strong IP moat around it so the cloud providers cannot just take a free version and compete with us. Unlike a lot of other open source technologies and with the success of Atlas. When we went public there was some degree of skepticism by some investors about could we really compete by building our own cloud service going head to head with the.
With the cloud vendors, but I think the results speak for themselves there aren't many businesses that are growing at over 80% that are at a half a billion dollar run rate and I think that speaks to our the IP that we have it speaks to the value of the customers are getting and it speaks to our ability to execute.
Yeah.
Great. Thanks, very much thank you.
This concludes our question and answer session I would like to turn the conference back over to David for any closing remarks. Please go ahead sir thank.
Thank you I just wanted to leave you with a few comments first I think you know what we really want it reinforces that we believe customers would realize that if they want to move fast market B is the best way to do so.
Second Atlas has growth of 83% reinforces the point that customers want a multi cloud platform that enables them to innovate quickly and outsource the undifferentiated heavy lifting of managing their data infrastructure.
Third we continue investing in evolving our go to market strategy across field sales inside sales and some of the self service channels to capture this large market opportunity.
And last but not least we continue to rollout significant and innovation to improve our platform through both ease of use and expansion of capabilities to encourage more and more customers to use them all going to be so thank you for your time 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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