Q4 2022 MongoDB Inc Earnings Call
Good evening. Thank you for attending today's Mongo DB fourth quarter FY 2022 earnings call. My name is Selena and I will be your moderator all lines will be muted during the presentation portion of the call with an opportunity for question.
And the answer is that the it if you like to ask a question. Please press star one on your telephone keypad I would now like to pass the conference over to our host Brandon you with ICR. Please go ahead.
Thank you celina good.
Good afternoon, and thank you for joining us today to review <unk> fourth quarter fiscal 2022 financial results.
Which we announced in our press release issued after the close of market today.
Joining me on the call today are Dave in each area, President and CEO , Margaret ABB, and Michael Gordon <unk>, COO and CFO .
During this call we will make forward looking statements, including statements related to our market and future growth opportunities.
So our product platform, our competitive landscape customer behavior, 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.
Actual results to differ materially from our expectations.
For a discussion of the material risks and uncertainties that could affect our actual results. Please refer to the risks 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 obligations to update them.
Additionally, we will discuss non-GAAP financial measures on this conference call. Please.
Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures the most directly comparable GAAP financial measure.
With that I'd like to turn the call over to Dave.
Thanks, Brian and thank you to everyone for joining us today I will start by reviewing our fourth quarter results before giving you a broader company update looking.
Looking quickly at our fourth quarter financial results, we generated revenue of $266 million or 56% year over year increase and above the high end of our guidance Atlas revenue grew 85% year over year, representing 80, 558% of revenue we had another strong quarter of customer growth ending the quarter with over 33.
Customers the fourth quarter marked another major milestone as we crossed 1 billion in annualized revenue run rate crossing over the 1 billion Mark five years after reaching the annualized 100 million Mark is clear evidence of the value marketing based application data platform offers customers large and small all over the world.
Our excellent fourth quarter performance was broad based we saw success in nearly every industry geography and customer type. It was powered once again by the ongoing strength of Atlas. We also saw an uptick in sales for enterprise advance, which speaks to the popularity among <unk>, regardless of where our technology is deployed cut.
Customer net additions remained robust, especially in our direct channel, where Q4 marked a new record.
It is expected that hundreds of millions of new applications will be developed over the next few years as most organizations now recognized that our competitive advantage has to be built rather being bought with off the shelf software. The core reason for our success is that in an era, where there is an urgency to build compelling modern applications Margaret <unk>.
As the friction and cost of working with data, which is the biggest challenge developers face. However.
However, the developer experience of working with data has become increasingly complex the technologies and mechanisms are working with data have continued to get more fragmented as there has been a proliferation of specialized niche data technologies. Each designed to solve a slice of a growing set of necessary data use cases, the hyperscale cloud providers are reinforcing this by taking a.
Bag of tools approach by introducing many proprietary point solutions. This approach pushes complexity onto developers to wrangle. These data technologies and their applications and developed workarounds to address scalability and performance.
Complexity created by this data sprawl impedes the speed of innovation adds cost and effectively becomes a direct business risk.
<unk> application data platform takes a radically different approach to liberate the developer from the unnecessary complexity to accelerate innovation.
First our platform removes enormous friction and how developer works to data instead of requiring developers to work with in flexible data models long DBS built on the document model, which is aligned to way to the way how developers thinking code. The dock in model not only allows developers to build applications faster, but to also easily make changes in.
Response to business conditions or customer feedback.
Second our application data platform enables developers to focus on the needs of the business as opposed to working round the constraints of their data infrastructure market. We abstract away all of that complexity through an architecture that is designed to address the vast majority of use cases, instead of having to deal with numerous point solutions customers can use our tightly integrated.
Form that offers a unified and seamless developer experience.
Third our platform is designed to meet the most demanding requirements or performance and scale. Unlike other solutions that struggles scaling beyond the few nodes in a few regions. Among the visa application data platform can enable anyone to provision a globally distributed and persistent data platform anywhere in a matter of minutes with just a few clicks.
By virtue of being available on 80, plus regions across AWS Azure and GCB.
Perhaps the best evidence that our platform is resonating in the marketplace is and the growth of our customer base. We ended the year with over 33000 customers of which over 360, <unk> customers and $164 million plus customers. The latter number growing nearly 70% year over year.
This level of customer adoption is reflective of our popularity around the world as well as our value as a general purpose rather than a niche technology.
To provide a small sampling of how <unk> used across different industries and financial services <unk> used for trading platform global payment data store, a digital end to end loan origination and servicing solution General ledger system of record regulatory risk Treasury and for many other back office processes.
In the retail sector. Among DB is used for single view real time product catalogs hyper personalization recommendation engines, AI, driven customer engagement inventory and supply chain management, including sensor tracking and omnichannel user experiences.
In the telecom industry monitor these used enabled smart home services Internet of things media streaming call routing endpoint management real time fulfillment.
<unk> fraud detection and advanced billing and payment services. These are a few examples among GBS being used we also do extensive work in the healthcare manufacturing gaming oil and gas and many other industries.
We continue to be excited about the future and the massive opportunities in front of us businesses across all industries will continue to invest heavily in software as a means to differentiate themselves to seize new opportunities and to respond to new threats.
While this has been happening aggressively over the past decade, we are still only in the early stage of this movement as infrastructure becomes more dense with chips getting more powerful algorithms getting smarter and networks getting faster the capability for innovation only increases powerful software powered by real time data will empower experiences and <unk>.
This is myles we cannot even conceive of today future applications will need to be incredibly responsive increasingly global and requires strong distribution data to the edge or across the world power.
However, there is still a dearth of development talent to meet this demand. Consequently organizations will invest in technologies that allow developers to go faster by offering an integrated suite of data capabilities to build smarter applications.
In fiscal 'twenty, three we will continue to build on our momentum and advantages in the marketplace and product. We will continue to continue innovating to enhance the value of our platform.
Our high win rates and strong broad based performance gives us confidence to continue to rapidly scale. Our sales organization as you remain fractionally penetrated into 70 billion plus market.
In marketing, we see a great opportunity to elevate our brand and our value proposition to the voice of our customers who are doing remarkable things with our platform across different industries and geographies.
Finally, we will continue investing our people processes and systems to support rapidly scaling our company.
Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the fourth quarter.
Ultra fast grocery delivery pioneer Goodyear has revolutionized last mile grocery delivery with its 10 minute grocery delivery proposition, making thousands of everyday items available within minutes. The company has built its core grocery delivery platform among the b community and migrate to Atlas deteriorate achieve superior performance.
And reliability and also relied on atlas's always on multi region clusters for $99 90, 95% uptime. During this critical U S launch.
One of the largest north American banks chose <unk> as its modern database standard to fuel monetization improve uptime and power are highly available always on secure customer experience for the banks 10 millions of retail customers.
The bank runs over 200 applications on longer to be across digital capital markets consumer lending risk and payment divisions.
Use cases spend mainframe offload operational data store single view of the customer time series caching real time analytics mobile and content management.
<unk> Generale D Informatica or soda is an information technology company operated by the Italian Ministry of economy and finance at.
It recently chose <unk> as the application data platform for a government initiatives at mandates citizens to present, a digital or papers certificate to show, whether they had been vaccinated tested negative or recovered from COVID-19.
Called the Green pass project the program grants Axises access to activities like restaurant dining museums cinemas amusement parks and more <unk> was able to generate a 150 million certificates and less than 45 days with <unk>.
Content cloud company box and powers more than 100000 businesses globally to revolutionize how they work by securely connecting their people information and applications.
<unk> content ingestion solution box shuttle Leverages <unk> Atlas to accelerate our customers' migration to the cloud box wanted a fed ramp ready multi cloud managed cloud database to support high throughput and horizontal scale by shorting large datasets.
One of the largest supermarket chains in the United States selected Atlas and Atlas Serge to Pirates enterprise promotions engine.
Engine gives customers immediate access to promotions and coupons, while shopping at any one of the thousands of stores across the U S with Atlas Serge The company was able to modernize the data structure. So that developers can make more updates more quickly and use multi dimensional array look ups to run 5 million inquiries per day faster.
Insulet Corporation as an innovative medical device company dedicated to simplifying life for people with diabetes Insulet flagship product Omnipod is the first <unk> automated insulin delivery system that is helping people with diabetes lead better lives.
Insulet migrated to <unk> Atlas to reduce costs, while simplifying the complexity of mission critical database management configuration upgrades and scale without business interruption, while having HIPAA.
And PCI compliance protection.
In summary, we had another excellent quarter. We are seeing continued strong momentum because we're solving one of the most important problems impeding innovation, namely the challenges of working with data we are more optimistic than ever about our prospects and we'll continue investing and executing to capture the large market opportunity ahead of us with that here's Michael.
Thanks, Dave as mentioned, we delivered another strong performance in the fourth quarter, both financially and operationally I'll begin with a detailed review of our fourth quarter results and then finish with our outlook for the first quarter and full fiscal year 2023.
First I'll start with our fourth quarter results total revenue in the quarter was $266 5 million up 56% year over year subscription revenue was $258 2 million up 58% year over year and professional services revenue was $8 $3 million up 17% year over year. It was a very strong quarter across the <unk>.
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 85% in the quarter compared to the previous year and represent 58% of total revenue compared to 49% in the fourth quarter of fiscal 2021, and 58% last quarter.
On a sequential basis. This quarter's strong Atlas revenue performance was driven in part by the exceptionally high in quarter expansion of existing customers that we experienced in previously called out in Q3.
Simply put strong in quarter expansion benefits not just the revenue and the completed quarter, but also the revenue in the following quarter, because the new quarter starts with a higher beginning run rate in.
In Q4, we experienced strong in quarter expansion of existing customers that was in line with historical trends versus the exceptionally high growth rates, we experienced in Q3.
Enterprise advanced had a particularly strong quarter and important driver of the strength of VA is the success, we're seeing in our large high potential accounts.
As a reminder, we provide incremental resources to some of our most promising customers in order to accelerate the adoption of Mongo DB.
A number of these high potential accounts are primarily using <unk> and we had a strong new business quarter with them in Q4.
During the fourth quarter, we again grew our customer base by over 2000 customers sequentially, bringing our total customer count to over 33000, which is up from over 24800 in the year ago period of our total customer count over 4400 are direct sales customers, which compares to over 3000 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 serve customers with whom we've now established a direct sales relationship.
The growth in our total customer count is being driven in large part by Atlas, which had over 31500 customers at the end of the quarter compared to over 23300 in the year ago period. It is important to keep in mind that the growth in our Atlas customer count reflects new customers. Among <unk>. In addition to existing EDA customers, adding incremental Atlas workloads.
We have another quarter with our net air expansion rate above 120%. We ended the quarter with 1307 customers with at least $100000 in <unk> and annualized MLR, which is up from 975 in the year ago period.
As Dave mentioned, we ended the year with 164 customers with at least $1 million in <unk> and annualized <unk>, which is up from 98 in the year ago period. The continued strong growth in our $100 million plus annualized spend is an indication of the success of our land and expand strategy and the fact that we are increasingly becoming a strategic platform for our customer.
<unk>.
Moving down the income statement I will be discussing our results on a non-GAAP basis, unless otherwise noted.
Gross profit in the fourth quarter was $196 $6 million, representing a gross margin of 74%, which is up from last quarter and up from 72% in the year ago period.
Our loss from operations was $1 $3 million or a negative 1% operating margin for the fourth quarter compared to a negative 9% margin in the year ago period, our outperformance versus our operating loss guidance was primarily driven by our revenue outperformance.
Net loss in the fourth quarter was $6 3 million or <unk> <unk> per share based on 67 million weighted average shares outstanding this.
This compares to a loss of $19 9 million or <unk> 33 per share and $60 5 million weighted average shares outstanding in the year ago period.
Turning to the balance sheet and cash flow, we ended the fourth quarter with $1 $8 billion in cash cash equivalents short term investments and restricted cash.
This quarter, we saw strong sequential growth in deferred revenue driven by the strength of enterprise advanced given EBITDA contracts are predominantly billed annually in advance.
As we've discussed in the past Q4 is the seasonally strongest quarter for our EAA installed base as a reminder, in Q3, we noted that our deferred revenue benefited from several very large Atlas early renewals, we did not see a similar impact in Q4, but would like to reiterate that some of those large deals that renewed early in Q3 were originally scheduled to renew and.
Q1.
Operating cash flow in the quarter was positive $22 3 million after taking into consideration approximately $5 5 million in capital expenditures and principal repayments of finance lease liabilities free cash flow was positive $16 8 million in the quarter.
This compares to negative free cash flow of $27 million in the fourth quarter of fiscal 2021 for.
For the full fiscal year 2022, we had positive operating cash flow of $7 million negative free cash flow of $6 $7 million, while while we have had positive operating cash flow quarters. Before this is the first full year in our company's history that we generated cash from operations.
I would now like to turn to our outlook for the first quarter and full fiscal year 2023.
Please note that the guidance provided for fiscal year 2023 include certain refinements to our non-GAAP financial measures for expenses related to stock based compensation to more accurately depict the underlying business results each quarter for comparative purposes. We have provided a historical reconciliation to these updated measures in our earnings release.
For the first quarter, we expect revenue to be in the range of $263 million to $267 million, we expect non-GAAP loss from operations to be 5 million to $2 million and non-GAAP net loss per share to be in the range of 12 to eight based on $67 7 million weighted average shares outstanding.
For the full fiscal year 2023, we expect revenue to be in the range of $1 billion $151 million to $1 billion $181 million.
For the full fiscal year 2023, we expect non-GAAP loss from operations to be 22 million to $7 million and non-GAAP net loss per share to be in the range of 51 to 29.
Based on $68 7 million weighted average shares outstanding.
Our strong guidance for fiscal 2023 reflects our underlying confidence in our market opportunity and our ability to deliver strong growth at significant scale.
Let me provide some incremental context around our guidance.
In Q1 at the midpoint of our guidance, we expect to see a slight sequential revenue decline is Q1 is typically a lower new business quarter for enterprise advance in Q4.
As a reminder, EBITDA revenue recognition under ASC 606 is disproportionately affected by the upfront term license component. In addition, as we've discussed in the past Atlas sequential growth in Q1 is lower compared to other quarters driven by seasonal factors impacting consumption. Most notably the fact that there are simply fewer calendar days in Q1 than in other quarters.
Let me also discuss how we are factoring the impacts of the COVID-19 pandemic into our fiscal year 'twenty three guidance.
Unlike in fiscal 'twenty, one and fiscal 'twenty, two we do not assume any impact of the pandemic on our revenue performance in fiscal 'twenty three despite the ongoing uncertainty related to the pandemic our performance over the last two years gives us confidence in our ability to execute in this environment in other words, our guidance reflects that we have more confidence operating the current environment.
And then in either of the last two years.
Second on the expense side, our guidance anticipates, the normalization of travel event and office expenses as COVID-19 restrictions continue to relax. We had previously expected a normalization in the second half of fiscal 'twenty, two but the spread of the Delta on Omicron variance to later return to office plans and reduced employee travel as a result, our travel event and office expenses.
In fiscal 'twenty, two we're only modestly higher than in fiscal 'twenty, one and well below our initial expectation how.
However, we now expect normalization starting in Q2, and we anticipate an incremental $45 million to $55 million in travel event and office expenses in fiscal 'twenty three.
To summarize <unk> delivered excellent fourth quarter results, we continue acquiring new customers at a strong pace and our revenue growth is a testament to the breadth of platform adoption and our increasing strategic importance to our customers. We remain convinced that we're in the early innings of pursuing our large market opportunity with that we'd like to open up to questions operator.
Thank you if you like last a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by Q again to ask a question press Star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we will pause here Bruce Lee ask questions that rich.
The first question comes from Kash Rangan with Goldman Sachs. Please go ahead.
Congratulations on the quarter I just wanted to clarify the seasonality comment Michael that you made with respect to athletes. So we're merely talking about it sequentially only because atkins is a much larger business today than it was exactly a year ago going into Q1 or are we actually calling out any structural.
Give some consumption.
Underlying that forecast that also have follow up questions. Thank you so much.
Yes, so what we're talking about and we called this out last year is that Q1 for Atlas is seasonally lower because of the fewer calendar days in the quarter. It's a consumption based model and just obviously you need days in order to consume and Q1 has fewer of those days, but the overall cohort behaviors as evidenced by the Q4 numbers are very <unk>.
Strong and we feel good about the underlying patterns.
Got it the consumption as a structural driver of your Atlas business is less positive as you felt.
Okay.
Okay got it and one for Dave.
When you look at the cohort of Atlas customers initial deployments steadily small, but then what are some of the bigger deployments on Atlas looking like that rival.
Or traditional on Prem deployments that give you the conviction that that some of the biggest database appointments on the planet could end up being completely cloud native.
Prices two to three years from now thank you so much.
Yeah. Thanks, Kash I would say just I'd point to the seven figure customers a majority of those customers are on Atlas today. So we have large customers and they actually even cutting edge startups, who are running mission critical workloads for startups is probably their entire business on Atlas for large customers. They are running mission critical workload.
<unk> and so.
Atlas is not just for small workloads, we're seeing and this has happened now for a number of years, we're seeing enterprises increasingly comfortable with moving mission critical workloads to the cloud and one of the benefits of moving to <unk> is that you get real optionality of not just <unk>.
Starting on Prem and moving to the cloud, but going from one cloud provider to another so we're seeing strong interest.
And I think we have the customer proof points to give people confidence to really move Michigan mission critical workloads to Atlas.
Tremendous thank you so much.
Thank you.
Thank you Kash. The next question comes from Sanjay <unk> with Morgan Stanley . Please proceed.
Okay.
And Mike Congrats on the core model.
Another exceptional year.
Greg you mentioned that wasn't a $100 million 1 billion.
Got it.
Okay.
<unk>.
Okay.
Hey, Sanjay.
Hey, Sanjay we're having.
Trouble hearing your question Thats come across very muffled.
Sure.
I apologize.
My headset.
So the question is essentially like as you scale beyond $1 billion to 1 billion to $2 billion is there anything in the.
Sort of how you go to market, how you organize the business.
<unk> versus how you got to $1 billion.
Typically.
Prior sort of ramps with software companies and there's been a bit of a hiccup scaling passed $1 billion. As this business crosses $1 billion. How do you feel about your ability to scale to 2 billion and beyond over time.
Sure. So we are constantly always tried to stay ahead of where the businesses in terms of anticipating changes to our go to market model I mean as you can imagine in the early days, we had one model, which has a direct sales force really trying to sell to everyone. Then we introduced an inside sales team then we introduced self serve then.
We've introduced the notion of having focused teams on high end accounts.
We introduced the notion of removing friction from the initials selling process to get customers on our platform more quickly. So we're always refining our go to market motion in anticipation of one how big this market is and we tried to meet customers, where they are versus trying to force them.
Try and engage with us in one.
One way and you'll see us continue to do that we're going to be focused increasing virtualization as I mentioned in the prepared remarks, we're seeing a lot of traction in key vertical industries. We are developing a deep degree of competence around those industries, we've been having a team focused on solutions marketing for a number of years to particular industries and youre going to see.
<unk> organized our sales teams more.
Over time with a vertical orientation, you'll also see us going after what we call digital natives, which are kind of fast growing mid market mid market customers, who are building software not just buying software and they will obviously have a lot of value to see a lot of value from longer it would be so its casinos can you push the envelope in terms of innovation and I would argue that we have.
The best sales organization in enterprise software.
Well plenty of opportunity ahead, it sounds like a lot a lot to look forward to Michael on the guidance you did a really great job of sort of texture lies in how you're approaching guidance this year versus last year, particularly around the element of Covid I guess I sort of just have to ask just given the geopolitical environment.
That we're in particularly with exposure potential exposure to Russia, and Eastern Europe and then we also have this element.
Higher oil prices and what that can do for.
The macro environment more broadly to what extent did you did you sort of incorporate those factors at this year's guidance understanding that COVID-19 looks hopefully knock on wood largely behind us.
Yes. So thank you. So obviously, we try and be thoughtful and transparent in the guidance that said, we don't have a crystal ball for what's going to happen geopolitically or Macroeconomically I think we feel confident in our ability to execute despite the uncertainty specifically on your point about Russia, I would just call up.
We it.
We have very limited revenue in Russia for fiscal 'twenty two was roughly.
Low single digit millions revenue contributor.
We're obviously complying with all of the relevant laws and regulations as they emerge.
But obviously if there are future things on the horizon that we can't contemplate we will certainly update you, but we feel good about the outlook.
Super helpful context, Thank you Michael Congrats.
Thank you.
Thank you. The next question comes from Raimo <unk> with Barclays. Please proceed.
Thank you.
These could you speak a little bit to the relationship with the bank.
Chris gave us it looked like that.
The deals influenced by them kind of shot up quite a bit like obviously, it's this funding relationship of corporate tissue like what you saw what did you see there in terms of like how big interacting with you and how that relationship is changing over time, and then I had one follow up.
Sure the basis of our relation with the cloud providers is really first and foremost based on the strong product market fit of long would you be monitoring these incredibly popular and possibly spans all major cloud providers I think what we've shown first with Google as we started working with them very closely given their ambitions to grow their business.
<unk> is that we could partner effectively and help them acquire a lot of new customers a lot of new workers workloads onto their platform. This did not go unnoticed by some of the other cloud providers and we started going deeper with AWS as people may remember in early 2018 AWS introduced.
Competitor, a clone of Mong DB, and though some worries about how that relationship will evolve and I'm pleased to say that I feel like the relationship has never been stronger we have deep relationships in the field, we partner more on deals and AWS is recognize that module b drives a lot of demand to their platform and so the relation there.
Very healthy.
And we're also doing a lot of business with Azure, So I would say.
Our win rates are still very high against them when we go head to head against them, but.
But clearly theyre good partners and we're investing a lot in those relationships.
Yes, Okay, and then Michael on the on the guidance.
Really impressive to see the March guidance, if I consider that 45% to 55 million extra.
Spending that we see this year can you just talk a little bit about the other drivers that help you achieve that.
The what sorry that helped us.
So just like.
It does look like the internal efficiencies or the scale of the businesses that allows you to do that because.
Despite the spending the outlook is actually better than what I modeled.
Yes, no we've been continuing to show meaningful operating leverage we feel good about that we're seeing scaling.
Throughout the business that said, we certainly are investing to pursue the market opportunity that means both investments in sales and marketing.
And in R&D, and obviously sort of everything else to scale the business, but no we've been really pleased.
Both at the gross margin line with the success, given where Atlas is as a percentage of the business and executing against the plan there as.
As well as on.
On the bottom line.
And I think that we'll continue to execute on that but we feel really good about where we are.
Perfect Congrats.
Thank you. Thank you.
Thank you Raimo next question comes from Phil Winslow with Credit Suisse. Please proceed.
Hey, guys. Thanks for taking my question.
We look at the just an analysis of just sales efficiency it seems that.
Productivity continues to rise, but he also contribute to add capacity what do you have a sense of just what youre seeing from the inside in terms of productivity and how youre thinking about this coming year in terms of just capacity adds but also productivity.
Yes.
Yeah. Thanks, Phil we feel really good about the performance and the productivity of the sales organization.
Performance was broad based one of the traps and software sales is that you can get.
You get some big deals can mask weak performance in the rest of the sales cohort, we're not seeing that we're seeing broad based performance across our entire sales teams across all the different theaters, so thats, giving us a lot of confidence.
We're adding a lot of people quickly <unk> viewed as a very attractive place to come to we believe that we really help people understand and master the art of sales and so we've put a lot of time and effort into developing our people. We because were growing so fast we give people tremendous opportunities for growth. So so people can really.
Grow their careers here at among the DB and.
Pushing the envelope on innovation, so we're doing things that not many other companies are doing and so all things put together, we feel really good about the sales organization and as a result of the reason why we are investing aggressively to expand the capacity of that organization.
Great. Thanks, guys keep up the great work.
Thanks Bill.
Thank you Phil. The next question comes from D. J Hynes with Canaccord. Please proceed.
Hey, guys nice set of numbers here.
Dave we've seen a bit of an inflection in revenue per customer over the last couple of quarters I'm wondering if that's more a function of your big customers getting bigger right I mean, we saw record.
100, K plus ads or is that all the smaller starting atlas customers that you've added over the last couple of years now kind of ramping to more materials spend levels I'm sure. It's a bit of both but I'd love to get some qualitative cover color.
Yes in general.
The expansion rates of the cohorts are very strong, but I think a lot of it is also due to the mix when we changed our.
The way, we want to engage with customers. We saw a big influx of of self serve customers moving to a direct relationship. So obviously that change in mix affected the revenue per customer number and as things have kind of as I said gone to more of a steady state function youre seeing those numbers stabilize but we feel we feel like we have.
Really.
Huge embedded growth opportunity in our customer base, and that's where we're spending a lot of time with as well as acquiring new customers.
Yes, Okay, and then Michael My follow up for you I mean, obviously, the EAA strength in the quarter drove the strong cash flow that we saw as you look out to fiscal 'twenty. Three do you think mongo can be free cash flow profitable.
Yes so.
A couple of things I would say part of that so in general has a very strong quarter Q4 from a cash flow perspective, I would say that's less as a result of the EMEA sales in Q4 and more a result of the strong Q3 inclusive of some of the pull forward that we had called out previously typically.
There is a little less intra quarter collection from when you book business, obviously, it depends a little bit on the linearity.
Haven't given specific.
Our guidance around operating cash flow positive, but I certainly do think it's noteworthy.
Not just the strong and significant magnitude.
The more than $20 million in Q4.
But the fact that we had $7 million in positive operating cash flow for the full year.
I do think is noteworthy it's not a specific milestone that we've focused on our set out but I do think it's a positive reflection of the underlying trends of the business.
Yes, I agree.
Okay. Thank you.
Thank you D. J. The next question comes from Karl Keirstead with UBS. Please proceed.
Oh, Thanks, a lot maybe two for Mike Mike back to the Atlas.
The strong sequential usage growth I'm sure you're well aware that some of your peers Snowflake confluent data dog that also have AWS centric usage models called.
Called out a bit of a usage lull or unusual consumption seasonality in December January did you see that and if you.
Perhaps it was offset by other drivers or did you not and if you didn't what makes your model different from those peers. Thank you.
Yes, thanks, Carl So no we saw very strong behavior in Q4.
Cohort expansion was in line with historical trends.
So nothing sort of abnormal or atypical there it was a strong quarter in Q4, as we mentioned in part because the beginning run.
Run rate was higher given the exceptionally high expansion in Q3, but Q4 itself.
Behaved pretty normally.
So I think it doesn't quite fit the patterns.
You're describing hard for me to speculate exactly on all the reasons why as it relates to those other businesses other than the fact that from the database standpoint.
It's sort of hesitant always on component to it for lack of a better phrase as opposed to something that is a specific <unk>.
Prasad, yes episodic or.
Query analytics prairie or bachelor's driven basis.
Okay. That's perfectly clear thanks for that Mike and then my follow up I just wanted to be crystal clear on what Youre conveying when you say that youre not assuming a pandemic impact in your fiscal 'twenty three guidance, Mike are you really saying that.
Youre guiding less conservatively going forward and therefore, implying that perhaps we should.
Not be thinking that the beat cadence will maintain at the level you've put up in the last two to three quarters.
Yes, the way I would think about it Carl is that our guidance philosophy, hasnt changed, but I think our perception of the uncertainty or risk of the environment has changed and given how well we have operated over the course of the last two years of the pandemic.
It will be hard for us despite the uncertainty that still exists.
I think we just have a lot of confidence that we can execute in that environment and that hasnt been the case. The last two marches when we've provided that guidance. So I wouldn't describe it as a change in <unk>.
Philosophy or a change in conservatism, but I think it's just sort of reacting to the facts as we have them and.
And less risk and less uncertainty than we've had previously.
Got it okay, that's very clear and congrats to the whole.
Team on the great results.
Thanks, Laura.
Yeah.
Thank you Carl the next question comes from Brent Graceland with Piper Sandler. Please proceed.
Thanks for taking the question here Michael It certainly is impressive to hear all this talk about <unk>.
Positive free cash flow and positive cash from operations I guess as you think about the guide for next year clearly much better than what we had modeled from a from an operating perspective, where do you expect to see the most operating efficiencies coming from in the coming year end and then Dave If you could talk a little bit about <unk>.
That lists the usage trends per customer are showing the highest growth rate that we've seen in three years and just wondering here. If that's seasonally strong or do you think this is just tied to a broader adoption broader number of customers standardizing on the platform. Thanks.
Yes, Thanks, Brent on the first part of the question.
Don't think that Theres any material skew one way or other if you look across the board I think we will continue to show progress overall and that will come from sales and marketing.
R&D and then overall the rest of the organization and G&A. So we're not intentionally trying to skew that.
A particular way as Dave mentioned, we feel like we are still quite thin on the footprint coverage and so we're trying to expand sales.
Sales and marketing as rapidly as we responsibly can just to make sure that we're in as many conversations and customer dialogues as possible and then given the breadth of the product roadmap and the returns that we've been getting on those investments. We think it's prudent to invest in those as well. So there's not one particular lever that we're looking to sort of disproportionately Inc.
<unk> scale.
Youll see a.
Scaling in aggregate as you can see in the results and in the guide and then Brian you want to cover the Atlas got it yes. So Brian so on your question on usage trends, whether it's seasonal or there's some.
All the things going on I would say, it's definitely the latter we are definitely seeing broader adoption of Atlas by customers, we're definitely adding more customers and more workloads to Atlas and I would also say the mission criticality of those workflows is increasing from say four five years ago to today, where people are now running.
Elements of their infrastructure major elements of their business on our platform and these are not applications that you turn off or slow down and I think thats why youre seeing the usage trends as.
As we've observed.
Yes, I would just add Bret I'm, not exactly sure, which math youre doing but if youre looking at sort of Atlas revenue average Atlas revenue per average Atlas customer part of that today's point will very specifically come from the fact that we are seeing increased adoption of Atlas among direct sales customers right, which will be at a higher spending level than self serve.
Customers.
And so that's really more of an output rather than an input again, we run the business on a channel basis, and Thats, a little bit of what's happening kind of below the surface of the math that you might be doing.
Helpful color, great to see the momentum thanks.
Thank you Brian .
Next question comes from Matt <unk> with Oppenheimer. Please proceed.
Thanks, Hey, guys great quarter.
Dave I wanted to go to the macro environment, if I know the events in Russia and Ukraine.
No not more than two weeks old, but I'm just kind of wondering if your discussions are pretty hard to a few of them.
With customers in Europe , or just greater concern does the continent, where we go into recession with several companies will go into a recession over there is there any change in the tone of the discussion in <unk>.
Richmond planning or are things getting allocated as far as deal closings any color that will help us.
Understand what.
The state of mind is over there right now of course outside of Ukraine and Russia.
Yes outside of Ukraine, and Russia, we see no change.
We feel really good about.
Q1, as part of the guidance and we.
When we look at this on a daily and weekly basis, and we're seeing no change.
Very good thanks.
Thank you. The next question comes from Richie Deloria with RBC. Please proceed.
Oh wonderful Hey, Dave Hey, Michael Thanks, So much for taking my question.
Just two on my end Firstly I wanted to start with the servers server list offering which is in preview mode can you talk a little bit about how is customer feedback and early adopter feedback then.
How to think about the long term impact starts to see real adoption and maybe help us understand.
Some use cases that you've seen for server list versus the core Atlas and then about a follow up.
Sure. So the whole notion of <unk> is to essentially abstract away the need to do capacity planning that people can basically connect to our database started using it and not have to worry about it anymore in the database with just scale up and down.
Based on the needs of the application and so the early feedback has been incredibly positive.
Seeing a lot of interest we have a lot of people using it today, we're getting great customer feedback and Youll see us continue to invest aggressively in surplus and.
And we look we obviously will have.
Our own dedicated offerings as well as surplus but overtime, we think surplus will become a more meaningful part of the business, but we're super excited about by the feedback so far.
Alright, great.
Wanted to go into the MLR, showing 120% plus NR at $1 billion. An IRR is really impressive can you talk a little bit about what what are kind of some of the drivers of being able to maintain this level of at all at this scale is it a function of.
Expanding workloads, new use cases, upmarket momentum lowered churn maybe walk us through a few of the drivers for keeping that up and how to think about that going forward. Thanks.
Yes so.
We believe that we have built a very durable business and a big reason for that is we really focused on acquiring workloads and acquiring customers and acquiring workloads in those customer accounts.
And unlike other businesses, where you can grow very very quickly because you're just basically manage a lot of data. We are our unit of measure in terms of account penetration as the number of apps for number of workloads. So they do take time no. One is going to move 100 workloads overnight, but you have a great opportunity because we're so fractionally penetrated in.
Even our existing accounts, even though they may be large customers and they are spending a lot of money with us there's still thousands of apps that we can win whether theyre, new apps or building or existing apps that they want to modernize and so we also put a lot of focus on making sure. Our customers are successful really ensuring that the customers get value very very quickly from a.
Platform, which obviously affects retention rates and churn and so the degree to which we do that well that also affects our net expansion rates and so I think those two factors along with adding new customers in general to our platform really helped keep that high net retention rates.
Alright, great. Thank you.
Thank you Richie the next question comes from Tyler Radke with Citi. Please proceed.
Hey, Thanks for taking the question obviously, the Atlas revenue was.
Really impressive this quarter, but I think the enterprise advanced revenue really really stood out to me.
This quarter it grew seven points faster than than you saw last quarter, where there was kind of a pull forward dynamic.
Was wondering if you could just kind of unpack the drivers of the EA performance. This quarter was it primarily driven by an uptick in new customers.
And given that EAA customers tend to be larger.
Larger companies or are you seeing any change in terms of.
The mix of legacy or.
Traditional database migrations.
Sure, Yes, as you mentioned and as I.
<unk> commented on in the prepared remarks. It was obviously a very strong enterprise advanced quarter Q4, historically has been the strongest EAA renewal base, we clearly demonstrated.
And observed very strong demand for more workloads most of that if you.
Setback more generically most sales of EMEA, our two existing EA customers, who are expanding incremental workloads.
And in addition, as we called out these sort of focus accounts that we're putting more resources around.
Number of them are primarily EAA accounts, and we had a lot of success deepening our penetration.
With those customers.
And given that Q4 is a larger renewal base, that's often a good time.
When that when that takes place certainly EAA.
It will be volatile quarter to quarter, given 606, but it continues to be very strong and again. Our goal is really just to give the customers choice and meet them wherever they are in their cloud journey.
Great and.
Maybe a question for Dave So you've released a lot of kind of interesting new capabilities around support for time series and in streaming I'm just curious how you're seeing kind of the uptick in operational intelligence or real time analytics within your within your customer base.
How impactful is that going to be.
In terms of growing existing.
Counts going forward. Thanks.
So we believe that the trend of applications getting smarter.
And they get smarter by embedding more data and more real time data and more analytics into their into the application is a trend thats going to increase dramatically, which is why we believe we're well set up to take advantage of that trend of one by definition, we're an operational data platform, but that's where you get the live data to we are a distributor platform. So you can segregate.
<unk> nodes.
One four.
Essentially writing the transaction and the other nodes for reading data. So this enables you to do that without impacting user performance. Three we came out with capabilities, where if you want to do is sophisticated.
<unk>, obviously operational data is constantly changing you can take a snapshot of the data at some point in time and run a query and get that get that get that result, and embed that result back into the application. So we're embedding more and more capabilities into our platform to enable developers to build smarter applications and as I mentioned with the advent.
A faster networks faster chips better algorithms.
The sophistication of use cases that are only going to increase and we feel like we will be we're really well positioned to take advantage of that and you'll see a lot of our investments go in that direction.
Thank you.
Thank you Tyler. The next question comes from Fred Meyer with Macquarie. Please proceed.
Thank you and your prepared remarks that you were mentioning how he was get here.
Scaling from just amongst the community addition onto Mongo DB Atlas and it got me thinking.
But either you or Michael will be able to provide any context on some of the larger Atlas customers are generally mongo DB customers and how many of them began as just kind of like community edition startups and scaled into some of your larger and more material accounts.
While in the early days all of them came from community.
So.
And what they were attracted by was the notion of really outsourcing all the undifferentiated work of provisioning configuring and managing a distributed database and essentially focusing on building great apps that transform their business.
Well, we've done over the last few years has really enabled a free tier of users on Atlas and so.
So they essentially can try and test and play with Atlas and then we get those customers to migrate into our paid offerings and we're starting to see increased success with that with that motion where people start our free tier.
Because they don't even want to they just want to work on the cloud and then very quickly they start using the <unk>.
Level of usage and interest ends up getting them to a paid offerings. So that's another trend that we're seeing that's emerged and so obviously it all starts with the product market fit among us you'd be the document model. The way, we just make it so easy to build applications quickly the way, we enable developers to innovate fast.
And obviously outlets just allows us to allows them to essentially focus on what's important and leave all the plumbing to US yes, I would just add that Atlas self serve whether it's free tiered or paid is sort of the modern more.
Contemporary version of downloading community server and managing it yourself as we pointed out before.
More than 50% of Atlas <unk> was self serve source right. So it's just sort of reinforcing that same motion that Dave was describing.
Hi, Thank you for the context, there and then I think I'm one of those free tier users. Eventually eventually it will scale up.
And second question.
Yeah.
Oh, thank you.
Over to your office and knocking the door and ask for some help just like back in the old days.
I'd also like to ask you about cash on the balance sheet in.
Generating some free cash flow this year material free cash flow. This year I wanted to ask how how Michael.
Michael are you thinking about cash deployment within boundary ODB G.
Generally are you thinking about.
Just really how are you thinking about cash in your balance sheet and how would you characterize mongo DB is M&A appetite if you have one.
Yes, so in general I would say that we've got an appropriate and very healthy cash balance was $1 8 billion.
It gives us the confidence to think long term, obviously, we're continuing to make operating leverage progress, but as we see needs or opportunities.
Our high return investments, we're able to make those I think specifically from an M&A perspective, we'll be opportunistic we feel like we've got a lot of organic running room.
To go but.
We'll certainly be opportunistic as needed Dave I know, if there's anything you want to add to that yeah, I would say that we obviously stay very close to the ground in terms of what's happening in the data infrastructure space is a lot of.
There's a lot of activity in the startup ecosystem.
But as Michael mentioned, we feel like we have a lot of opportunity.
With our core offerings, we have done some acquisitions of past events tend to be smaller more surgical acquisitions and if we do end up doing anything it's probably more in that category than anything meaningful.
Thank you for the context and congratulations on a strong quarter.
Thanks, Brett.
Thank you Fred the next question comes from Steve Conine with NBC. Please proceed.
Okay.
Hi, gentlemen, just one question today from me.
Last week, it was pretty surprising to see from Snowflake, how performance improvements in their platform negatively impacted effective pricing and the revenue outlook and I don't think I've ever seen that.
Either working on or cover and database companies.
And so I'm wondering.
Yeah.
Commenting on them tell.
Tell me about maybe your model why why wont performance improvements negatively impacted you guys and is there a difference between operation and analytic data stores. That's relevant here. Thank you very much.
Yes, Thanks, Steve for your question I would say the big difference is our unit of work is the application of the workload I would say other companies unit of work as the amount of day to day, they have to ingest and I think when people think about building a new application. There is obviously some sort of business case.
Essentially some funding to solve some important business problem, we're seeing some new business opportunity. So if you think about that investment very differently than the amount of data that are constantly collecting so as you can imagine it's not surprising to me that some customers when they see their bills escalate probably get frustrated at the.
Rate and pace of how their bills are escalating, whereas as customers are building new applications on our platform for them. That's a new decision on a new use case and for them. It makes sense to obviously invest the appropriate resources and technologies to deliver on that use case. So I think that's the big difference.
That you are seeing and and we have made performance improvements in our platform, but it doesn't show up.
And the way I think it does for other companies and I think we feel very very comfortable about the value proposition of our offering to our customers.
Awesome alright, Thanks Vic.
Thanks, Steve.
Thank you Steve. The next question comes from Mike <unk> with Needham <unk> co. Please proceed.
Hey, guys. Thanks for thanks for getting me on for a couple of questions here and I did just want to walk through the guidance real quick for Michael If I'm thinking about that revenue guidance that you guys provided for the full year of fiscal 'twenty three.
And parse out Q1, but does that imply deceleration is that just should we be thinking about that as just more difficult year on year comps is that.
Are there any other puts or takes to that and then the second point.
Gross margins is really just held up.
It's predominantly given the amount of exposure coming in from at least as it becomes a more meaningful driver to total revenue.
Should we still expect some gross margin erosion going forward is that Atlas becomes a larger piece because of the associated infrastructure component.
Sure.
You think about your gross margin versus the first question.
Yes, so thank.
Thank you.
No I think overall on the guide we feel like it's a very strong outlook, we're guiding too significant durable growth at scale I.
I would say two key factors to point out one is we continue to expect more atlas over time, and so less 606 impact.
Of EAA, obviously over a 12 month period.
That also it comes out in the wash, but given the upfront term license component piece is more of the business shifts from EMEA.
Two Atlas over time, we expect to have less of that and then yes. The second point would be you called out which is the strong.
Outlet performance, particularly in the back half of the year sets up a very significant compare and then on the gross margins.
Yes, we've been Super pleased with how we've done on our gross margin game plan, we've executed better than we had thought we could.
If we thought that was going to be this size and scale and a 58% of revenue you'd say, we have 74% non-GAAP gross margins of 77% non-GAAP subscription margins I would've doubted that we'd be able to execute that I don't think were prepared to call a bottom, but I do think that we are closing in on one given the strong performance of our Optum.
Physician program.
Thank you very much for that and I hope I didn't mean to sound like the revenue guide is not strong here I just wanted to make sure I understood the puts and takes to the full year.
Just one more.
One more if I could I think the last time, we received an update as far as incremental opex and I'm thinking about that $45 million to $55 million that we're talking to is as commercial activity normalizes right.
For the I guess backwards looking here, but for fiscal 'twenty. Two I think we might have been expecting call. It nine to 12 million based on the most recent data point, we had and just wanted to see how the year ended up finishing up versus that $9 million to $12 million.
I guess guidepost that we had previously headwinds when thinking through the Q4 upside.
Yes, I think what we've talked about it we said in the end fiscal 'twenty two came out broadly in line with our fiscal 'twenty, one spending than we had expected to spend much more in fiscal 'twenty two on the sort of.
I'll call them Covid related expenses for lack of a better phrase.
And just given the <unk>.
Environment and backdrop, we did not see as much activity there.
It makes a ton of sense. Thank you very much for getting me on guys I really do appreciate it.
Thanks, Michael.
Thank you Mike.
That concludes the Q&A session I'll pass the conference back to Mongo DB CEO , David just curious for additional remarks.
Thanks Celina.
I think it's fair to say that we had an excellent quarter, we're seeing to see strong momentum. We believe that we're solving fundamental problems in addressing fundamental prompts that developers have and the value of our platform offering one unified integrated way to solve and address many use cases is really resonating in the marketplace, So and thats evidenced in our and our and continued <unk>.
Customer growth, so with that I want to thank everyone for joining us today and we'll talk to you soon take care Bye bye.
That concludes the Mongo DB fourth quarter FY 2022 earnings call. Thank you for your participation you may now disconnect your lines.
Okay.
Okay.
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Okay.