Q3 2022 MongoDB Inc Earnings Call
Good day and welcome to the Mongo DB third quarter fiscal year 2022 earnings call.
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I would now like to turn the conference over to Brian <unk> from ICR. Please go ahead.
Thank you Eiley.
Good afternoon, and thank you for joining us today to review <unk> third quarter fiscal 2022 financial results.
We announced in our press release issued after the close of market today.
Joining the call today are Dave each area, President and CEO of Mongo, DB, and Michael Gordon Mongo, DB CLO and CFO.
During this call we will make forward looking statements, including statements related to our market and our 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.
And its impacts on our business results of operations clients and the macroeconomic environment may cause actual results to differ materially from our expectations.
For a discussion that might show a rest of uncertainty as it could affect our actual results. Please refer to the rest 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 their most directly comparable GAAP financial measure.
With that I'd like to turn the call over to Dave.
Thank you, Brian and thank you to everyone for joining us today I will start by reviewing our third quarter results before giving you a company update.
Looking quickly at a third quarter financial results, we generated revenue of 227 million, a 50% year over year increase and above the high end of our guidance Atlas.
<unk> revenue grew 84% year over year, representing 58% of revenue and is now over half a billion revenue run rate, we had another strong quarter of customer growth ending the quarter with over 31000 customers.
Our third quarter results demonstrate that customers are increasingly choosing mongo DB to build modern apps that run their businesses. We had another strong quarter of customer additions led by self service channel, both our field sales and inside sales teams again performed well a key driver of results as the healthy expansion of our customers as many of them are meaningfully increasing their adoption of Mongo DB.
As you'll hear from Michael some of our largest customers made increased multiyear commitments to them all going to be in Q3.
Our performance is clear evidence that <unk> is emerging as an enterprise standard and a growing number of accounts.
Excellent excellent Q3 performance is the result of continuously strong go to market execution as well as a confluence of two factors circlet trends that reinforce our technical advantages and our growing credibility and influence with customers.
Let me start with the secular trends that play to our strengths.
First the ability to move fast and innovate quickly whether it's pivoting to a digital first strategy quickly seizing new market opportunities or respond as new threats has never been more important montney bees document model maps data to the way developers thinking code removing friction from the development process to enable developers to move incredibly fast.
Second while theres been a proliferation of single purpose databases that address specific needs. The result is that most customers find the challenges of learning managing and supporting a married of technologies and resulting data silos to be overwhelming.
Sequentially, there is growing demand for a modern general purpose database platform that supports a broad range of workloads to dramatically reduce the cost and complexity of our company's data infrastructure marketing visa application data platform is designed to address the specific need.
Third the performance and scale expectations of modern applications continue to grow.
He was distributed architecture supports unlimited unlimited horizontal scaling, allowing organizations to linearly scaled costs as applications grow and to easily address data sovereignty regulations or to ensure responsive and predictable performance whether users are local or across the world.
Today, we have customers have workloads doing over 1 million transactions per second with data sizes of hundreds of terabytes legacy platform struggled to address these demanding performance and scale requirements.
Fourth the accuracy availability and security of data are of Paramount importance Moggy allows developers to easily build resilient mission critical applications with native replication fast and automatic fail over and Retrievable operations long live you also offer sophisticated security controls for axis auditing and end to end Triptan weather data.
As in use or at rest.
And fifth customers want choice on where and how they deploy their applications.
Developers can build and run them all going to be applications that are in datacenter and any cloud and at the edge.
However, technical advantages are not enough unless there are customer proof points to validate these technical claims.
As a disruptor of a massive market with a long standing and French technology, we have to build our credibility one workload at a time.
We usually land an account by identifying a pinpoint that that simply cannot be addressed by legacy technology. We then leverage the success of the first workload to expand across divisional and geographic boundaries.
Eventually we up level the conversation to the C suite and become a standard for future App development well.
While it's still early days, we believe a key driver of our success. This year has been the growing trend of customers choosing among them to be as an enterprise standard which is having a positive impact on our ability to increase our penetration of these accounts over time.
With more than 31000 customers, which is up 10 X since our IPO four years ago, we have all types of customers using long do you need to do a wide variety of amazing things to run and transform their businesses.
We have had tremendous success in acquiring customers from large global 2000 organizations to cutting edge startups across all major industries in most geographies. This creates a compelling social proof of that when you are able to reference customers in particular industries or geographies, who are aggressively adopting market b other customers in those same industries or geos.
Or more interest in engaging with us.
While we feel confident about our position in the marketplace. We are not standing still we recently moved to a quarterly product release schedule, starting with Marlin to be 5.1 to bring new features and capabilities more quickly to market.
Highlights among them to be 5.1 include time Susan enhancements.
Such as support for shorting improved capabilities for joins in draft reversals to do more sophisticated real time analytics and enhancements to our client side field level encryption security feature to work with any came up complying key management system. In addition, we announced a preview of our ability to provide hundred X faster facets and counts and Atlas search.
Fastest search allows users to filter and quickly navigate search results by categories.
Fast fastest and counts are essential in a search first applications, such as product catalogs and content search.
I'm going to be combines the core database and search database into one unified developer and operational experience differentiates it from all other standalone application search offerings in the market.
Last but not least we also announced Atlas data API, which allows developers to easily access among D. B data via standard rest like interface.
It exposes among the bees, rich query and aggregation capabilities via a fully manage scalable and resilient API, which allows customers to quickly build micro services on an atlas and easily integrate with a wide array of tech stacks.
We made these product announcements or adopt local developer conference in London, which is our first in person events. Since the start of COVID-19. We also just returned from AWS reinvent, where you announced the expansion of our relation with AWS, including the launch of a pay as you go along to be outlets on the AWS marketplace.
Customers, who are used to buying services from the AWS marketplace can find a simple and integrated way to subscribe to mark to be Atlas, starting even with a free trial and use Atlas without the need for not front commitment. This makes it even easier to start using Atlas.
Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the quarter.
Coinbase, which is dedicated to increasing economic freedom in the world by building more accessible transparent and equitable financial system is the trusted choice of more than 73 million individuals businesses and institutions to interact with the crypto economy.
The company is moving more work close to market analysts, who can build new products and services quickly and meet the scale and available requirements of the unprecedented growth in the cryptocurrency markets.
The adoption of Atlas data Lake gives their engineers is simple and powerful way to create resilient data pipelines that enabled downstream analytics on the large volumes of data generated by the platform.
Global Technology and Communications leader Verizon is working with Marc do you need to bring data closer to the edge as part of its multi access edge computing and five G data architecture, that's going to enable the next generation of low latency applications, such as machine learning intelligent edge Robotics E. R V. Our autonomous vehicle telemedicine.
And more.
Q health as a health care technology company that makes it easy for individuals to access health information and places diagnostic information at the center of care there.
Our revolutionary new device to Q health monitoring system paired with their COVID-19 test is the first at home molecular COVID-19 test available over the counter without a prescription.
And it is used by the N B, a Johnson <unk> Johnson in the Mayo clinic, the company chose money to be Atlas search and realm sunk to power their mobile application mobile database and and synchronization, enabling consumers to receive data from the acute health devices on the smartphones and securely stored in the cloud.
Telecom Italia mobile or Tim the communications industry leader in Italy, and Brazil to up sticks mobile and cloud infrastructure data centers service offerings and products for communications and entertainment.
The company at the forefront of digital technologies, Tim selected <unk> Atlas for fly together its core digital service delivery platform to accelerate the transition to Google cloud and enables flexible delivery of digital services through a micro services architecture market, it's been a partner and maximize the customer experience across all of its digital channels.
In summary, we had another excellent quarter. Our strong performance is a result of the seeds, we planted years ago, such as launching Atlas releasing multi document acid transactions and expanding our go to market channels to complement our enterprise sales organization or.
Our continued success for the fuels our aspirations.
Not only expect to benefit from the seats already planted but we will continue to plant and you see that drive long term growth.
Customers are embracing the vision of our application data platform that simplifies their data architecture, while accelerating the pace of innovation. We believe the seeds. We're planting today will yield strong results in the years to come.
Before I turn it over to Michael I would especially like to welcome our new CMO, Peter you lender to Mongo DB a developer at its core Peter joined Us from AWS, where he lead developer in enterprise marketing. He brings deep experience in the cloud open source engaging with developers and has a track record of helping brands from startups to tech leaders to take.
A major market transitions with that here's Michael.
Thanks, Dave.
As mentioned, we delivered another strong performance in the third quarter, both financially and operationally I'll begin with a detailed review of our third quarter results and then finish with our outlook for the fourth quarter and full fiscal year 2020 two.
First I'll start with the third quarter results total revenue in the quarter was $226 $9 million up 50% year over year subscription revenue was $217 $9 million up 51% year over year.
Professional services revenue was $9 million up 35% year over year.
He's a very strong quarter across the board and we exceeded our expectations for both Atlas and enterprise advanced.
Overall Atlas is strong performance continues to be the largest contributor to our growth.
Atlas grew 84% in the quarter compared to the previous year and now represents 58% of total revenue compared to 47% in the third quarter of fiscal 'twenty, 'twenty, one and 56% last quarter.
In any given quarter the sequential growth of Atlas is driven primarily by the expansion of the existing applications on our platform.
As you can see in our strong Q3 results that expansion was towards the higher end of the historical range this quarter.
Enterprise advanced also exceeded our expectations this quarter driven by stronger than anticipated new business demand.
During the third quarter, we again grew our customer base by over 2000 customers sequentially, bringing our total customer count to over 31000, which is up from over 22006 hundred in the year ago period.
Of our total customer count over 3900 are direct sales customers, which compares to over 2800 in the year ago 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 have now established a direct sales relationship.
The growth in our total customer count is being driven in large part by Atlas, which had over 29500 customers at the end of the quarter compared to over 21100 customers in the year ago period.
It is important to keep in mind that the growth in our Atlas customer count reflects new customers to among would you be in.
In addition to existing enterprise advanced customers, adding incremental Atlas workloads.
We had another quarter with our net air expansion rate above 120%.
We ended the quarter with 1201 customers with at least $100000 in air or an annualized <unk>, which is up from 898 in the year ago period.
The continued strong growth in customers with $100000 or more and are are 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 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 third quarter was $163 $9 million, representing a gross margin of 72%, which is consistent with last quarter.
And consistent with 72% in the year ago period.
In the near term, we continue to expect some modest reduction in overall company gross margin as Atlas continues to grow as a percentage of our revenues.
Our operating loss was $3 $5 million or a negative 2% operating margin for the third quarter.
Paired to a negative 11% margin in the year ago period.
Our outperformance versus our operating loss guidance was clearly driven by our revenue outperformance, but also by timing of certain expenses.
Due to the ongoing COVID-19 pandemic, we are experiencing less of a rebound in travel.
Events and workplace expenses that we'd previously assumed at the beginning of fiscal 'twenty two we'd shared with you our expectation that these categories would contribute an incremental $20 million to $25 million in expenses for the year compared to fiscal 2021 with most of it occurring in the second half.
Given the sustained impact from the pandemic. Our revised expectation is that these incremental expenses will only amount to $9 million to $12 million for the current year.
We see this as a one time benefit is we do expect our activities to return much more closely to pre COVID-19 levels in fiscal year 'twenty three.
In addition, our marketing spend was lower than expected in Q3, as our new CMO, Peter Orlando, you your lender, but certain programs on hold while he evaluated their effectiveness. This process is now complete and we expect our marketing spend to revert to normal levels in Q4.
Net loss in the third quarter was $7 $2 million or 11 cents per share based on $66 4 million weighted average shares outstanding.
This compares to a loss of $18 $2 million or <unk> 31 cents per share or $59 4 million weighted average shares outstanding in the year ago period.
Turning to the balance sheet and cash flow, we ended the quarter with $1 $8 billion in cash cash equivalents short term investments and restricted cash I would also like to point your attention to a meaningful sequential increase in our deferred revenue.
As Dave mentioned in his remarks, we are increasingly becoming an enterprise standard and a strategic partner to our largest customers and correspondingly. These customers have high confidence in continued growth of Mongo DB.
In order to optimize the best commercial terms. These companies these customers typically make multi year commitments to Mongo DB.
In Q3, we had a number of our largest atlas customers renew their Q4.
And Q1 contracts early because these are atlas customers and Atlas revenue is recognized upon consumption. The multiyear nature of these atlas commitments did not affect revenue in the period. However, there was an impact on deferred revenue given these contracts are billed annually in advance.
Well early renewals occur regularly in our business. The dollar magnitude in Q3 was significantly above what we had experienced in the past.
Operating cash flow in the third quarter was negative $5 $8 million after taking into consideration of approximately $3 $4 million in capital expenditures and principal repayments of finance lease liabilities free cash flow was negative $9 $2 million in the quarter. This compares to negative free cash flow of $14 $9 million in the third quarter of fiscal 2021.
I'd now like to turn to our outlook for the fourth quarter and full year fiscal 2022.
For the fourth quarter, we expect revenue to the range of 239 million to 242 million.
We expect non-GAAP loss from operations to be $13 million to $11 million and non-GAAP net loss per share to the range of 24 to 21 cents based on 67 million weighted average shares outstanding.
For the full year of fiscal 2022 we now expect revenues in the range of $846 $3 million to $849.3 million.
For the full fiscal year 2022 we expect non-GAAP loss from operations to be $36 4 million to $34 four.
$4 million and non-GAAP net loss per share to the range of 74 to 71 cents based on $64 6 million weighted average shares outstanding to.
To summarize we delivered excellent third quarter results, we're seeing strong customer additions as well as external expansion within our existing customers customers have increased confidence in our application data platform and are in turn increasing their commitments to mongo DB. Our performance gives us increased confidence to continue investing to capture the large market opportunity ahead of us and we're seeing attractive return.
And those investments with that we'd like to open it up to questions.
Operator.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing.
To withdraw your question. Please press Star then.
T O.
Our first question today comes from Sanjay <unk> with Morgan Stanley.
Thank you for taking the taking the questions and congrats on a very strong quarter great. Good results across the board, including Atlas If I take a step back Dave and I look at where we are with Atlas in terms of the mix sort of 58% of revenue. It's almost two thirds of your subscription revenue.
When we looked at the motion around migration, so enterprise customers had been expanding for Atlas for for quite some time now are you starting to see more of the outright migrations on enterprise advanced Atlas Where's that.
Still on the come in when customers do you do that is there a revenue uplift associated with customers from enterprise against Q2 hours.
Thanks, Angie it yeah to your question on migrations still a very small set of customers who've actually migrated from enterprise advanced to Atlas the bulk of our growth of Atlas is a net new workloads.
And in terms of the price increase.
In general there's it's it tends to be flattish, maybe there's a slight price premium, but does not like some significant price delta.
Again, you know, we do I would say that the growth of Atlas is really driven by the massive cloud transformation.
Formation happening in the enterprise.
And our best of breed vendors are winning and clearly customers are very comfortable moving mission critical workloads not only to the cloud, but also to me to be and that's what I think you've seen here.
It makes total sense and I in your script I thought the callout of unclaimed baseband customer was pretty interesting that they're obviously no tied.
To this sort of new financial Revolution, that's going on and when you think of massive scale, but also.
Financial transactional integrity I was wondering like what the sort of specific set of use cases Atlas is playing with that customer or is that more around sort of customer interactivity or is that more on kind of on the transactional level.
Yeah, I think there's limits to what I can say, but it's definitely the transactional level along with some adjacent applications and what I would tell you is they have some pretty unique requirements. When it comes to performance and scale and as you can imagine and in their market. They have a lot of periods, where they have some intense training days and then so the you know to scale up.
Very very quickly.
To deal with those surges in trading volume and so on and so forth. So they basically realize the only platform out there that could really address their need was marketing be.
Oh, great feather rather than cap when they're in a very impressive although I'll cede the floor. Thank you congrats a great quarter.
Thanks Angie.
Yeah.
Our next question comes from Ryan Lynch with Barclays.
Congrats from me as well two quick ones.
What we saw this quarter.
In terms of what we haven't seen for quite a wireless on the he side you talked about.
New customers are starting to come back and doing more deals et cetera can you talk a little bit about what you're seeing there in terms of what people are doing on that side is that kind of more regulated industries that cargo to Atlas yet today, where it seems like post pandemic investments again, and then I had one follow up for Michael.
On the deferred side.
Yeah, we have a lot of EAA customers, who are just expanding their their usage of mongo DB in the enterprise. So much driven by cultural reasons, where we're basically there are you know, they're just comfortable running workloads in their own datacenter and wanted to continue to do that the benefits of them. Obviously is that when they do decide to move to the cloud they don't have to rewrite one.
A code and then clearly there are some customers who are constrained by the industry the operate in and they can't move to the cloud as quickly as they like to and that's where it comes in.
Okay, but you do see it's coming back now after the pandemic as well okay.
And then Michael on the deferred side.
And obviously like Norcal P&L benefit on people originally earlier like what what's driving those kind of peak early yours did you do anything in terms of payment terms are something to encourage did or.
Is that like you are a financial year was just different because it seems unusual without you kind of pushing for it.
Yeah. I think this is an example of really customer demand and responding to the customer you know needs I think what we've tried to make clear over the last couple of years is that we're trying to make it increasingly easier to adopt and use them hungry to be and we've tried to strip away. Some of the incentives that our sales folks have for people to do things on naturally so its much more customer centric.
And this is really a result of them looking at their own demand profiles internally aggregating demand and thinking and being confident that there'll be able to sort of expand more and therefore looking for sort of best possible commercial terms, and they're coming to us and saying hey, we'd like to commit to even more based on what we see internally.
Perfect Congratulations really good news.
Thanks Raimo.
Our next question comes from Brad Reback with Stifel.
Oh, great. Thanks, a lot.
Dave You had mentioned the hiring of Peter CMO and Michael you talked about some delayed marketing spend as a result can you give us a high level sense of what maybe some of the changes the marketing go to market will be going forward.
Yeah, I think what what Peter wanted to do and you know he came from a almost like he came out of central casting given his background in open source in the cloud and also knowing how to engage with developers. He really wanted to do a comprehensive review of all of the marketing programs that are underway.
And what he's done to I wouldn't say that it's a major swings in kind of strategy, but it's basically making some optimizations around doubling down in some areas and pulling back in some other areas. So I don't think you'll see any drastic changes. He's also building tighter relationships with the sales organization and so he and Cedric pasture our CRO.
<unk> are working very closely together.
And making sure the marketing team is aligned with our sales efforts around going upmarket as well as going down market. So that's essentially what's happening and we're thrilled to have Peter on the team.
Great and Michael maybe one quick follow up for you last quarter, you had talked about some specific to Q3 Q seasonal trends within Atlas anything we should think about as it relates to <unk> seasonal trends as we head into the end of the year. Thanks.
Yeah, I think there there are a couple of different ways to think about that I think within Atlas. As we mentioned you know Q1 is seasonally softer and so we were trying to help put in context. Some of the strength that we saw in Q2 certainly the results in Q3.
We're very strong and compare very favorably when you sort of adjust for that seasonality I think the only other thing I'd call out that's probably important in terms of Q4 seasonality is two things one we had a very strong you know year ago year in Q4, particularly in Atlas and then on a more macro basis Q4 tends to be disproportionately.
<unk> enterprise advanced centric a lot of the renewal base as it relates to you know workloads are tends to be like I said disproportionately skewed towards enterprise advanced in Q4, and so that's I think another factor to keep in mind as well.
That's great. Thanks, very much guys.
Thanks, Brad.
Our next question comes from Brent bracelet with Piper Sandler.
Good afternoon, thanks for the questions.
But we'll see the return of 50% plus growth for the first time in two years on.
The drivers of the growth.
And it looks like not only the gestural Atlas new customer growth, but the Atlas usage in particular.
He was very strong even stronger than last quarter. So walk me through kind of what are you seeing across the broader set of customers what's driving how are you.
Atlas usage on a per customer basis, and one quick follow up on on the renewals.
Yes sure Brent. Thank you a few different things. So I think you have to think about the the mix overall and just as a reminder for folks you know we don't run the business on a product basis, we run the business on a on a channel basis.
I'm just so people can I can remember that but if you think about the overall growth I think about it in terms of new business and then expansions of existing behavior. So it continued to be another strong new business quarter within Atlas workloads.
Net new business doesn't tend to have as big an impact immediately.
Whereas under enterprise advance you've got the term license component recognized under 606, and then as it relates to expansion we've seen very consistent like good strong cohort behavior across the expansion I mentioned in the prepared remarks, specifically for Atlas during this.
This quarter that what we saw was sort of higher than are sort of at the higher end of what we typically see for for the cohort behavior and that drive a lot drove some of the Atlas outperformance. You can also tell if you look at our numbers and Brett I don't know if this is what you're getting at but you can tell if you look at the numbers, where you can calculate from our disclosure the average revenue per direct.
Sales customer and that is you know up a little bit year over year and up sequentially and I think that's you know generally pretty impressive.
Given the fact that there's a bit of a tailwind given that you know a lot of the customers that we've added overall are in the mid market who tend to spend below the average level and then also some of those customers that are new to the direct sales channel our self service customers, who we've moved to be in we've now establish a direct sales.
Our relationship with them they will grow more quickly as a result of that but that's revenue is not all like net new and obviously those folks start at a lower basis, and so I think sort of despite some mix.
Winds if you want to think about it those results have continued to impress us.
Absolutely.
On the renewals.
Short term deferred.
$49 million sequentially, you talked about some of that being renewals can you just maybe remind us why someone would be motivated to renew early would it be strictly tied to some of the rebound you saw in <unk>.
Have you been doing well.
Are there benefits.
Benefits for an Atlas customer if they're starting to consume more E D.
In each of the A&H for them to kind of really we.
New.
Onboard more use cases, just trying to understand because there is a little unusual why customers would be willing to do.
To spend more now in early renewed just trying to drill a little deeper into that thanks.
Sure Yeah, no it and that's part of the reason why we wanted to call. It out because it was a typical obviously, we've said for some time, though.
That deferred revenue and the calculated billing calculation the number of folks to is not a particularly insightful are instructive measure for our business and that certainly continues to be the case, but just given the behavior and in Q2, we wanted to call that out these were Atlas customers and therefore really you know as we discuss it doesn't affect the revenue the revenue on Atlas is really.
All consumption.
Based and so what this is reflecting is the increasing strategic or mission critical nature of Atlas in those accounts are and so.
Those folks are looking at their run rate, they're seeing their run rate increase and while they may get whatever benefits are of the initial commercial deal that they struck given that there you know at meaningfully higher run rates they want to make sure that they are they're getting sort of the best.
Commercial terms out of the relationship and as a result, our entering into committed paying advance our contracts for larger amounts to try and make sure they're optimizing their spend levels with us and so that's why we want to call it out but again, unlike kind of typical you know kind of the calculated billings number you know my sort of hyper.
Officers or assumption is it part of the reason that people like that as they view that as sort of an indicator of future revenue and or where the business is going I think given that Atlas is consumption based and and these folks are already we're at run rates you know often that exceeded their commitments is not necessarily is helpful. In that way that people are traditionally used to seeing it but nevertheless, I think it's a it's a great sign around the strategic nature.
Of Atlas in their conviction to kind of continue to invest in and expand usage of the platform.
Very clear and helpful color. Thank you.
Our next question comes from D J Hynes with Canaccord.
Hey, Thanks, guys.
Echo the congrats awesome set of numbers here.
Two questions I'll start with you Michael just kind of building off the the thread that.
Brent started last question around expansion I know you guys don't get granular with disclosure around net revenue retention metrics in north of 120th Great. But is it fair to think that youre seeing that metric tick higher and I think it makes sense given your net adds have been strong, but they've been pretty consistent for the last five six quarters, but our growth has been accelerating.
Is that one of the drivers.
Yeah, I would say that the net you know air expansion rate has been strong at that north of 120% level and I think when we look at the underlying cohort dynamics they have generally.
Been consistently strong and I think that success has really been a mix I think it's you know, adding new customers as well as expanding within existing customers and you have to remember a lot of times, particularly with Atlas, which is where the bulk of the new customers are coming theres, new customers aren't necessarily coming right away and are coming or you know spending at.
They're full levels right away and so you get a little bit blurred.
It becomes a little bit sort of you know artificial distinction between them you know what is a new customer land in what is a you know what does what part is the expansion rate because when you think about if youre starting off relatively small and I only look at you know what are you spending on day, one everything else is expansion. So yes of course, you could say that but you wouldn't have that opportunity.
Expand if you hadn't added them and so just I think it's two pronged I think its both you know acquiring new customers continuing to lay that foundation for that sort of expansion of the the the multi layer layer cake or however, you want to think about it and so we've got to keep adding those new customers, but then expanding within them. So hopefully that yeah, yeah, no it makes sense.
And then Dave I wanted to ask you a competitive question, it's really not related at all to the quarter, but my sense is that radishes out talking to public investors more so maybe you could just spend a minute touching on competitive differentiation. There I don't know if that's P value versus document or maybe use cases.
They make more sense than you and vice versa, any compare and contrast, I think would be helpful. At this point.
Yes, sure so and you know reddish as predominant use as a front end cash and so that was a use case that actually a lot of people also use marketing before in the early days.
We have a much broader set of capabilities as a document model. We support so many different types of workloads between key value immune support relational joins we now have time series graft reversals et cetera.
So so we offer a broad set of capabilities will also support multi document acid transactions. So to the Coinbase example, and now we have lots of financial services customers are using us for mission critical workloads, the breadth and capabilities of our platform or our far wider and superior.
And I think what we what I talked about little bit in the prepared remarks was that we hear loudly from customers that they just can't continue to use a net new technology for every net new use case that the challenges of learning supporting and managing all these different data technologies, having all these different data silos, how do you synchronize that data how do you.
Secure that data how do you back up that data how do your query that data becomes even more challenging and so they're gravitating to a more of a modern platform where they can run most of those workloads on one platform it really simplifies the operational.
Issues, it really makes our life a developer that much more easy and so that's why we're winning we don't really compete with writers per se. It's very rare that'd be go into a battle right is because it's it becomes quite easy to differentiate our capabilities against them, but this is a big market. So there's no doubt that they're probably getting some traction somewhere but we really feel good about our.
Adventures.
Yep very helpful. Thank you guys.
Yeah.
Our next question comes from Kash Rangan with Goldman Sachs.
Dave and team congratulations on a fantastic quarter, Dave I'm curious to get your perspective as you look at our Atlas If you were to look.
At a three to four years from now what kind of scale of applications do you see Atlas supporting scope of application Scaleup applications Atlas supporting that are currently just not today and what are the other technological breakthroughs that youre looking for in the core system to be able to accomplish.
Clearly three four years from now what the market would you be escaped achieving thank you so much congrats again.
Yeah. Thanks, Kash, so what I'll say is you know one of the advantages among Tvs had from day one as that was built on a distributed system right. So by definition, we allow our customers to really scale out there in the environment and deal with massive amounts of data and and very you know high performance requirements and the reason they're coming to us.
It is because the existing relational technologies just can't handle today's scale. So to your point as modern applications have even greater requirements to scale. The the existing set of technologies will be even more handicapped and so we've done some a lot of sophisticated things around replication.
For data and resiliency charting for scale out doing things like workload isolation, so that when you're running sophisticate analytics, you're on impact user performance building.
Building and materialized views. So that you can predefined queries upfront and have those that data ready versus trying to run. This crees when you need it and then you know impacting CPU usage all of these things, we're doing and we're just chipping away and adding more and more capabilities. So it's hard for me to sit here and say well we would be doing five years from now, but we're just pushing the.
Envelope on performance and scale and because we've been built on a distributed architecture, we have a fundamental advantage over all the other technologies out there and that allows us to really serve our customers well and that's why the most sophisticated and demanding customers like coinbase in the world and others are using long would you be because no other platform can address their needs.
Wonderful. Thank you very much happy holidays.
Thanks Kash.
Yeah.
Our next question comes from Karl Keirstead.
Yeah.
Yeah.
Oh. Thank you I wanted to ask you about the business and if we can go back to that 20% growth was an acceleration from mid teens over the last couple of quarters and if it if it was not the EEA business that was the beneficiary of these early renewals what would you attribute the growth rate acceleration Q, Michael I know you.
<unk> generally new business demand, but maybe you could elaborate thank you.
Yes, certainly thanks, Carl I think this goes back to some of the things we've said for a while which is that you know.
Well you know clearly we're seeing a lot of adoption of Atlas not every customer is ready to be in the cloud and our goal is to give customers choice.
To meet them wherever they are on their cloud journey enterprise events can be a great setup as David alluded to earlier to eventually you know moving into the cloud when they are ready for it but I think more broadly it just sort of speaks to the fact that demand going to be value proposition.
Resonates with customers and so here we have <unk>.
Customers, who are not as cloud full word continuing to add and expand to their mongrel footprint.
And you know that drove the better expected quarter that we saw from sort of that product line.
Got it Okay. That's helpful. And then Michael just if you don't mind back on D or does it feel like this early renewal larger multi year commitments phenomenon.
Is sort of one off ish or does it feel like this is the.
The start of a trend and maybe to put it another way would you encourage us to be somewhat tempered.
Our Dr growth estimates for <unk>.
<unk> and <unk> if in fact.
Some deals renewals where were pulled forward. Thank you.
Yeah, I think I'm going to say sort of yes to both even though that might seem somewhat contradictory in the sense of like yes, I think it's a one off I think it is a directional trend over time as Atlas becomes more strategic within accounts, but I would at least in the near term certainly think of this as more one off which is part of the reason why we wanted to explicitly call it out so.
People didn't sort of get unduly.
Take.
Take the numbers and sort of extrapolate or do whatever you all want to do with it.
Yeah, Hence my question that's clear thanks, Michael.
Yeah.
Our next question comes from Patrick <unk> with JMP Securities.
Oh, great. Thank you and let me add my congratulations.
Dave I've been I've been listening carefully to some of the broader themes that you've been mentioning as we've been going through them.
The cloud transformation in the enterprise the benefit the distributed architecture.
And the reason is because I've been trying to figure out what it what it might be.
<unk> D b.
No Blake.
Data dog in conflict might all have in common because you guys are already at Super high growth rates and all accelerated in Q3.
So if you have wanted to see your thoughts on that.
Eric.
Well thanks.
Thanks for the question what I would say is a couple of things. One obviously, we are going through a massive transformation of the enterprise where people are moving workloads to the cloud.
They have taken some time to get there, but now they're really moving aggressively to move not just tertiary second tier apps, but mission critical workloads to the cloud.
But by that moved there also being very thoughtful about what technology to use that not just taking the.
Now the standard offerings from from any of the cloud vendors, but oh cloud providers, but really taking a best of breed approach and so I think that's what you're seeing is the is the beneficiaries are they're basically choosing the best technologies available in the marketplace and running their workloads, there and I think we are well positioned and that's and to your point about the <unk>.
These are trends that I mentioned, you know the their desire to increase the speed of development are people just going to want to move faster of course, they are either going to wanted by Standalone single purpose databases know they need to have a general purpose platform performs and skill requirements gonna grow overtime of course, they are the security available you're going to report of course, they are like well costs.
One choice of course, they will so we feel all of those trends are only going to be you know playing to our strengths and and that's why I think youre seeing customers increasingly choosing long would you be to run their mission critical applications in the cloud.
Great. Thank you.
And our next question comes from Fred.
With Macquarie.
Okay. Thank you.
So mongo DB, you recently announced pay as you go for Atlas last quarter, you announced server list for Atlas no across the board among it would be it's really looking like you're trying to align database consumption deployment and utilization and make that much a much tighter loop that I think it really has been historically.
Also I got to say I'd like to Shout Uncork ramping of Mongo DB and I recall that earlier. This year. You've also announced you Ipass had adopted Mongo DB. So you certainly have something going on but supporting low and no code workloads, but you know that's the kind of question on hand here.
How should we be thinking about Atlas growth drivers between say traditional enterprises adopting atlas purchase more agile development cycles versus say innovative startups rapidly growing on your platform and perhaps adopting it because it's much more tightly aligns with their need for scaling.
Yeah. So thanks for the question I just want to make one clarification. The pay as you go that we announced in AWS is only new to the marketplace at AWS. We've always had a essentially a an option where you could sign up via self serve without any commitment and we also actually offer that option now our salespeople, who can offer that for customers to basically sign up.
With a zero dollar contract just to get started so the pay as you go was really just a feature available on the Amazon AWS marketplace, because obviously, they transact a lot there and we just want to make it even easier for customers on an on marketplace to engage with Atlas, but it's part of the general theme, but just as Michael mentioned, just making more and more easy for customers too.
To use outlets in terms of signals are you looking for obviously, we really like the fact that large well known brands and I've mentioned a couple of them in the prepared remarks are using long DB, but but also pay attention to the signals of startups, who are using long would he be because to me when starts are betting on marketing because that's a great sign for our future because the question I'd ask you.
How many starts today are using Oracle and I can't think of many and so so to me we spend a lot of time now you're looking at you know the starts using long it would be but what are some of the you know the next generation developers what tech stacks are they using what modern application frameworks or they're using and that's where we feel really good because marketing bees clearly at the center of those eco.
Systems, and and that's a good sign of health for our future.
Thank you, Dave and I think that you know your your rankings on stack overflow. It consistently reflected some of that too. So a quick follow up question for Michael.
I think you know can we get an update on how many of your over $100000 are our customers would qualify for that level of spend on Atlas alone are you seeing any any customers out there that are approaching on the Atlas say like north of $1 million in IRR.
Yeah. So a couple of things. So we reported earlier this year that roughly over 60% of the 100 K customers.
Would have qualified just on their Atlas spend alone there's been no material change.
To that number so I think it continues to be a very strong percentage of Atlas and so you know that's not surprising given the increased investments that we're seeing customers make.
Great. Thank you and congrats on the strong quarter.
Thank you.
Our next question comes from Jason Ader with William Blair.
Yeah, Thanks, Hey.
Hey, guys I know you've kind of covered this ground somewhat but I wanted to ask it in a slightly different way.
So this is the biggest beat you've had maybe ever and I'm just wondering if.
You know if something changed in the market here in the second half whether it's the velocity of the enterprise transformation to cloud or is it something more company specific where you've just been able to kind of separate yourself from the competition more.
Yeah, I think the thanks, Jason I think a couple of things as we sort of tried to call out in the prepared remarks I think it was just a really strong quarter.
Across the board, we talked about Atlas and our success in Atlas and the stronger expansion than we typically see a you know which is great and then it was also a really strong enterprise advanced corner as people commented on in some of the questions and in the follow option. So I think there you know.
Continue to be sort of multiple legs of the growth. We continue to add you know customers. We continue to find you know that the customers that we're adding are behaving attractively you know inconsistently with their kind of like kind cohorts from beforehand. So that the changes that we've made in terms of making it easier to adopt <unk> going to be an easier to.
To get on the platform you know are working and are having the desired effects and I think it's just sort of the culmination of all.
All of those things going you know really well, resulting in a really strong quarter that certainly beat our expectations.
So it's kind of have you know maybe half macro where things are moving faster to cloud and and have just really good execution across your various product areas is that is that a fair way to think about it.
I think I think it's hard to sort of parse it that way I guess I just look back and say you know we're going after an incredibly large market. We are being increasingly effective at capitalizing on that market opportunity you see that sort of showing up in the numbers.
Dave talked about in the prepared remarks sort of the social proof you know impact and other things like that.
And so I just think all of that really added up to an exceptionally strong quarter.
Thanks, guys.
Yeah.
Thank you.
Yeah.
Our next question comes from its I cant draw with Oppenheimer.
Thanks, Greg numbers.
My question is to you on the competitive front.
Got it.
Rain event last week at <unk> in Vegas, and I couldnt be more.
<unk> by the number of server less announcements that AWS made with regards to pretty much every database platform that they have.
At the same time, they've also been pushing D. The document D b and highlighting its compatibility to you I think version for at this point and also.
The mantra of all.
There they're whole event was the right tool for the right job and so it seems like they're taking a little bit of a different approach.
To you and clearly they're being extremely successful. So I guess my question is two fold number one oh, what do you make up all the server list announcements in what way do they make your life, a little bit more difficult to you and that they significantly simplify adoption of any platform, but then second.
Your platform comment could it just be that the market overall for everybody is very strong that the market isn't necessarily shifting to a platform.
It's just all boats are getting lifted right here right now.
Yeah, well I'll make a one he thought it was good to see you at reinvent. It was good to good to actually have a face to face conference. So couple of things one I would say is.
On the surplus part we announced surplus over the summer.
And we've been working on it for a while document to be still does not have a service offering just to be clear and and the reason we announced surplus was that we wanted to make it even easier to use them all going to be people would not have to do upfront capacity planning and pick a particular instance size that the database would just scale elastically as their demands grow.
The second thing I would say that that is very different in terms of our strategy versus a AWS. The strategy is we don't believe that customers want to use 15 or 18 different databases I don't know if any customer in and.
The team and I and our Salesman's Asian, we spent a lot of time with customers no customer said I want to use that many different databases because the challenge is it's very simple the challenges of learning managing supporting all of those different technologies, having data sitting in all those different silos, knowing how to query that data backup that data a synchronized data isn't is in.
Operational Nightmare and so that's why we believe our approach of offering of general purpose platform to to for our customers to consolidate workloads is really resonating in the you know with our customers and obviously you see it in our numbers and I would say.
Amazon, obviously has a big brand a there are a lot of reach and they can get and it's a it's a big market. So clearly they're doing well, but we feel you know we've been you know partnering in competing with them and many others in the marketplace and we're holding our own in fact.
Now, what we're doing extremely well and and and we feel really good about our competitive position.
Very good thank you.
Thank you.
Yeah.
Our next question comes from Phil Winslow with Credit Suisse.
Hey, guys congrats on a good quarter and thanks for taking my question just wanted to focus on on the go to market channels, obviously, you've been highlighting the success you're having in direct so a question. There is like how are things trending in terms of new hiring there how do you feel about capacity and sort of plans for next year, but also one of the things that you highlighted was the self service channels under the new.
Our non direct channels that you're seeing so I was wondering if you buy just more detail on those two.
Yeah sure. So so yes, as you've talked about and in many of the quarterly calls that we're trying to grow.
Our sales capacity as fast as operationally possible Q3 was another great quarter for hiring.
Hum and it's basically a where we're running the same playbook. We're getting are you know we're gonna increasing segmenting the market as you know we have a field sales organization, we are inside children's Asian, but we've we're now finding that this is like mid market segment comprised of really digital natives, who are building their own applications and being very sophisticate into the use of.
Oh Gee, maybe have also raised a lot of capital that are that's a that's a big target market for us where we're probably on the margin going to start looking at some vertical areas of where you know there's some commonality of use cases, where we can really leverage that common learnings across say like financial services manufacturing retail health care et cetera, and.
So and that's all things in terms of just refining and optimizing our go to market and so I know on the self serve side again it's.
It's really helping drive our business the combined self self serve inside sales field sales organization and our partner innovation is creating a really virtuous flywheel effect just to be clear yeah, even today now or over half of their revenue in Atlas was sourced from self serve so the self serve channel is a great way to acquire customers.
And our sales organization then uses the customers require and then grows them even faster. So the virtuous cycle is working really well.
Awesome. Thanks, guys, Congrats again on an awesome quarter.
Thanks, Phil.
Our next question comes from Tyler Radke with Citi.
Hey, Thanks for taking my question I wanted to ask you just how are you seeing these large cloud platform.
Partners help you get into these larger deals I know you talked about that a bit in the script, but I'm curious if you're seeing those are also helped to accelerate the migration away from kind of a non prime.
Relational incumbent as well just just talk to how those large.
Cloud platform partnerships have kind of evolved from a relationship perspective. Thanks.
Yes, sure Tyler and again it was good to see you all said reinvent last week, what I'd say is that the cloud partners have kind of realized that are you.
You know when the workload on Atlas workloads moving to the cloud. They are the beneficiary of multiples of that revenue that spent with us on their platform between the consumption of the underlying storage and compute as well as all the other ancillary services.
A customer may may use and so it's truly it sounds like a cliche, but it's truly a win win relationship. So we've seen our partners and and obviously last.
Last week, we got some great relationships with senior level people at AWS because.
The relationship is really working and we're seeing a lot of we're doing a lot of business together and where we're becoming a very very meaningful partner for them and so.
And I think of it as you know, we've obviously been working with them closely now ever since the launch of Atlas over the last five years and we've learned a lot of lessons that are important not only to have product integrations. It was also important to have the sales organization is aligned to work well with each other and that took a little bit of time to work through these are naturally there's some competitive offerings in and salespeople are not the most trusted.
Types of Lynn when they have to work with someone who may have a competitive offering but when you incentivize them to work well together and when it becomes clear that we had a far superior solution. The you know the cloud rep from other particular cloud providers more than happy to work with us because they're going to get so much of the business that comes to them and that's essentially what's happening were doing now deeper integration.
<unk> and and then as you as we talked about we announced the pay as you go announcement with AWS marketplace. So, we're just making easier for our customers do business with us in the cloud provider together, which is good news for everyone.
Great and then just on hiring and you mentioned it was a strong quarter and do you anticipate that you're going to grow your kind of your direct sales force faster next year than you did this year.
Yeah, I don't think we're prepared to go into you know what we'll do next year, just yet that'll be that'll be in the March quarter, but I would tell you. This and generally we've been trying to grow our sales capacity as fast as operationally possible now we do have a high bar. So we're not just going to hire salespeople Willy nilly.
And we also want to make sure that we have the leadership capacity in place to develop in and get it we've got the sales reps to execute in a consistent way quarter in quarter out. So we put a lot of thought in terms of how we.
Think about capacity planning, where we have people.
Do we have the right leadership in place et cetera, et cetera, and but we're trying to move as fast as possible.
Thanks, and good to see you last week.
Thanks Tyler.
Yeah.
Our last question today comes from Jack Andrews with Needham.
Good afternoon, and thanks for fitting me into the call I just wanted to ask if there is a quick update you can provide on time series and just how we should be thinking about that attach opportunity within Atlas in and how that may drive that maybe the rate and pace of consumption.
Yes, I think what we're seeing is that the time series is a use case, that's growing quite rapidly and I think what is driven by is that are you know you have your small inexpensive Iot sensors and fast and reliable wireless networks, having just made it so much easy for so much easier for organizations to generate generate and collect time series data. So for example, you know Walmart will have seven.
<unk> unique data points in stores electric cars now over have over 1000.
No sensors and the cars. So so you know and then just the census could be you know.
Across the board temperature sensors, smart watches smart meters and blood glucose monitors, you know et cetera, et cetera, and so that's a big big opportunity that we see and and marketing bees well designed to service those workloads that we can ingest data very quickly.
And and we can scale as the volume of data grows.
And so that's something that we're very focused on we've made some enhancements to now support time series before was just on replica sets now, it's uncharted clusters, and you'll see us going after that opportunity quite aggressively and again the benefit of the customers again to have one platform, where they can run time series workloads. They can run key value workloads they can run.
Transaction intensive workloads et cetera, all in one platform with one developer experience and and and so it just makes their lives so much more easy.
Thank you and congratulations.
Thank you.
This concludes our question and answer session I'd like to turn the call back over to Dave.
For any closing comments.
Well. Thank you for joining us today as you know we had an excellent quarter and I think just to reiterate our strong performance is really due to again, our consistent go to market execution as well as the confluence of the fact that the secular trends are really.
Reinforcing our technical advantages and our growing credibility with customers and our Q3 results really give us increased confidence to continue investing in planting seeds for future growth with that I'd like to wish everyone, a very happy and healthy and safe holiday season, and we look forward to talk to you soon take care.
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