Q4 2024 MongoDB Inc Earnings Call
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Thanks, Valerie good afternoon, and thank you for joining us today to review <unk> fourth quarter fiscal 2024 financial results.
Which we announced in our press release issued after the close of market today.
David: Joining me on the call today are David it's area, President and CEO of Mongo, DB and Michael Gordon <unk> C O M and CFO.
During this call we will make forward looking statements, including statements related to our market and our future growth opportunities.
Our expectations for the macroeconomic environment in fiscal 2025, and the impact of AI.
So 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 include the results of operations and financial condition.
Cause actual results to differ materially from our expectations.
David: For a discussion of mature restaurants, certainly as it could affect our actual results. Please refer the rest described in our quarterly report on Form 10-Q for the quarter ended October 31, 2023 filed with the SEC on December seven 2023.
Any forward looking statements during this call reflect our views only as of today.
And we undertake no obligation to update them, except as required by law.
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 the most directly comparable GAAP financial measures.
I'd like to turn the call over to Dave.
Dave: Thanks, Brian and thank you to everyone for joining us today I am pleased to report that we had another strong quarter that capped off an impressive year as we continue to execute well to capture a large market opportunity.
Chart by reviewing our fourth quarter and full year results before giving you a broader company update.
Starting with the fourth quarter, we generated revenue of $458 million or 27% year over year increase and above the high end of our guidance Atlas revenue grew 34% year over year, representing 68% of revenue we generated non-GAAP operating income of $69 2 million for a 15% non-GAAP operating margin and we ended the quarter with over four.
<unk> 7800 customers.
Overall, we are pleased with our performance in the fourth quarter, we had a healthy quarter new business led by continued strength in new workload acquisition within our existing Atlas customers. In addition, our enterprise advanced business again exceeded our expectations demonstrating strong demand for our platform and the appeal of our run anywhere strategy.
Moving onto Atlas consumption trends as the quarter played out in line with our expectations and we saw strong consumption stronger consumption down in Q4 of last year, Michael will discuss consumption trends in more detail. Finally retention rates remained strong in Q4, reinforcing the quality of our product and the mission criticality of our platform.
Stepping back and looking at fiscal 'twenty four as a whole I am proud of what we accomplished we achieved revenue growth of 31% and our non-GAAP operating margin of 16% well above our initial expectations.
<unk> grew 37% year over year, and we added over 7000 customers ranging from AI startups to fortune 500 companies.
<unk> had a record year of fast paced innovative product releases, such as vector search variable encryption and the preview of Atlas stream processing reinforcing why so many customers and developers choose marketing piece developer data platform. Finally, we continue to innovate on our go to market motion to drive workload acquisition.
As we look into fiscal 'twenty five let me share what share with you what I see in the market first I'm excited about our opportunity to win new business in today's digital World customers Express their business strategy through software our software strategy that one of the most important investments a company can make is in the productivity of its software developers consequently customers are gravitating towards market.
As their next generation developer data platform standard.
Second I see stable consumption growth going into next year Atlas consumption trends have been steady for several quarters now and we experienced less consumption variability in fiscal 'twenty four compare to fiscal 'twenty three.
Ultimately the main driver Atlas consumption as the growth in the underlying application usage and we see stable growth stable usage growth across our portfolio of workloads.
Third while I strongly believe that AI will be a significant driver of long term growth from are going to be we are in the early days of AI akin to the dial a phase of the Internet era.
To put things in context, it's important to understand that there are three layers to be asked at the first layers the underlying compute and <unk>. The second layers of fine tuning of models and building of AI applications and the third layer is deploying and running applications that end users interact with marketing strategies to operate at the second and third layers to enable customers to build their.
Locations by using their own proprietary data together with any LLM closer open source on any computing infrastructure.
Today, the vast majority of AD spend is happening the first layer that is investments in compute to train and run llm's. Neither are areas in which we compete are enterprise customers today are still largely in the experimentation and prototyping stages of building their initial applications first focus on driving efficiencies by automating existing workflows.
We expect that will take time for enterprises to deploy production workloads at scale.
However, as organizations look to realize the full benefit of these AI investments they will turn to companies like minded to be offering differentiated capabilities capabilities in the upper layers of the stack.
What happened in the Internet area era, when value crude overtime to companies offering services and applications leveraging the built out infrastructure.
Platforms like marketing people benefit as customers build AI applications to drive meaningful operating efficiencies create compelling customer experiences and pursue new growth opportunities.
We already see our platform resonating with innovative AI startups building exciting applications for use cases, such as real time patient diagnostics for personalized medicine cyber threat data analysis for risk mitigation predictive maintenance for maritime fleet and Autogenerated animations for personalized marketing campaigns.
Finally, our competitive position is getting stronger our win rates remain very high across all competitors, we rarely compete with legacy database providers as enterprises understand that they need to move away from inefficient and brittle legacy technology. We also rarely run into niche database players since customers are overwhelmed by the proliferation of <unk>.
<unk> that are hard to manage and add limited value.
Our main competition competition remains the cloud players they offer a wide array of database options relational non relational and benefit from the size and reach.
We compete well against these players due to the flexibility and scalability of our document architecture. The fact that our open platform can run anywhere and avoids locking and Margaret <unk> popularity among developers all around the world.
Finally, when you look at our newer products, we see increased success competing against the established players in those markets. We find that the same principle applies as in the core database market customers don't want to manage a myriad of point solutions and prefer consolidating their spend with strategic vendors, especially in the current cost conscious environment.
In summary, we expect the environment in fiscal 'twenty five to be largely similar to the environment. We experienced in fiscal 'twenty four with that backdrop. Let me tell you what our priorities are going to next year.
First we will continue pressing our product advantage in the core database since we believe customers will place an even greater premium on performance and scalability in the AI enabled world. In addition, we will continue to mature and our newer products, including additional features of vector search <unk> Atlas stream processing and enhancements to other offerings.
Second we will remain singularly focused on new workload acquisition as a key long term driver of our business. We will continue fine tuning incentives to ensure that our entire go to market organization is focused on identifying and sourcing new workload opportunities. In addition, we will leverage our expertise and learnings from our self serve business to use product led growth techniques to increase the adoption.
Should a atlas by other development teams within our existing large enterprise accounts.
Third we are focused on growing sales capacity as we told you in the past we are slow to grow capacity in fiscal 'twenty for especially in the first half due to macro uncertainty.
Given that the market is more stable now and that we remain underpenetrated compared to our opportunity. We will increase the pace of go to market investments in fiscal 'twenty five.
Fourth we will continue investing to become a standard and more of our customer base, we intend to double the size of our strategic account program and dramatically expand our account based marketing efforts in our largest accounts.
Finally, we remain focused on locking the relational migration opportunity to remind everyone. There are three elements to migrating and application transforming the schema moving the data and rewriting the application code.
Relational migrate your offering is designed to automate parts of the first two elements, but rewriting application code is the most manually intensive element.
<unk> holds tremendous promise to meaningfully reduce the cost and time of rewriting application code. We will continue building AI capabilities as it relates to migrate or but our view is that the <unk> solution will be a mix of products and services. This year, we're investing in a number of pilots leveraging AI for relational migrations paired with services to substantially.
Dave: Five and scale the process.
Now I'd like to spend a few minutes reviewing the adoption trends among <unk> across our customer base.
Customers across industries around the world are running Michigan mission critical projects on marketing outlets leveraging the full power of our developer data platform, including Z F Forbes and Swiss Federal Railways C. F. A global technology company supplying systems for passenger cars commercial vehicles and industrial technology needed a central database.
<unk> with broad functionality to support more than 300000 commercial vehicles connected to <unk> infrastructure <unk> originally began using <unk> on premise in 2014 and migrated to <unk> Atlas to modernize the architecture behind its new fleet orchestration solution. The team now uses time series and online archived to reduce the overall data storage size.
As well as monitoring the Atlas search to manage indexes and Atlas charts to display building information.
<unk> developed our data platform enables <unk> to release, new features faster as innovative technologies like drones and autonomous vehicles continue to come to market.
In any big pay in any way or real estate are examples of customers turning to among davita free after developer's time for innovation, while achieving significant cost savings.
Anywhere real estate, a global leader in residential real estate services was brand portfolio includes better homes and gardens century, 21, Coldwell banker Corcoran.
Sotheby's International Realty is leveraging <unk> Atlas and Atlas serves to greatly enhanced search capabilities. Their previous solution was too costly and operationally burdensome to maintain now with Atlas search they can ingest data from hundreds of MLS sources aggregate the data and provide customers with a <unk> solution that efficiently.
Livers accurate and up to date information saving time and lowering costs anywhere is also exploring the use of Atlas vector search to provide semantic search and Jen AI features to millions of consumers.
Samsung Electronics, Arcelor Mittal, and citizens bank are turning to <unk> to modernize applications.
<unk> electronics digital appliances division transitioned from their previous my sequel database demography outlets to managed appliance data more effectively by leveraging <unk> document model sang some smart home service can collect real time data from the teams AI powered home appliances and use it for a variety of data driven initiatives such as training AI services.
<unk> electronics digital appliances division transitioned from their previous my sequel database demography outlets to managed appliance data more effectively by leveraging <unk> document model sang some smart home service can collect real time data from the teams AI powered home appliances and use it for a variety of data driven initiatives such as training AI services.
Their migration to <unk> Atlas improve response times by more than 50% and discrete latency was reduced from three seconds to 18 milliseconds significantly improving availability and developer productivity.
Let me wrap up by saying that I remain highly confident about our ability to execute on our long term growth opportunity, representing one of the largest and fastest growing markets in all of software with significant expansion opportunities in both new and existing customer accounts. While it's early days, we expect that <unk> will not only support the overall growth of the market, but also compel customers serve visit both their legacy workloads.
And and build more ambitious application this will allow us to win more new and existing workflows and to ultimately continue to establish <unk> as a standard enterprise accounts.
Speaker Change: Before I turn it over to Michael I would like to personally invite all of you to attend the investor session at <unk> Dot local NYSE to be held at the Javits Center on May 2nd. Please E mail IR at <unk> Dot com, if youre interested in attending with that here's Michael.
Thanks, Dave as mentioned, we delivered a strong performance in the fourth quarter, both financially and operationally.
Begin with a detailed review of our fourth quarter results and then finish with our outlook for the first quarter and full fiscal year 2025, first I'll start with our fourth quarter results total revenue in the quarter was $458 million up 27% year over year and above the high end of our guidance as Dave mentioned, we had another quarter of healthy new business acquisition.
Training, our product market fit and the mission criticality of our platform.
Shifting to our product mix, let's start with Atlas Atlas grew 34% in the quarter compared to the previous year and now represents 68% of total revenue compared to 65% in the fourth quarter of fiscal 2023, and 66% last quarter, we recognize Atlas revenue, primarily based on customer consumption of our platform and that consumption is key.
Mostly related to end user activity of the application.
As a reminder, in Q4 fiscal 'twenty three we had a higher than normal amount of revenue from unused commitments, making this a tough year over year comparison.
Excluding the impact of unused commitments Atlas year over year growth in Q4 was in line with the growth that we observed in Q3.
Let me provide some additional context on Atlas consumption in the quarter.
As we shared in our guidance last quarter, we were expecting consumption to be impacted by the seasonal slowdown in Q4 around the holidays week over week consumption growth in Q4 was stronger than in Q4 of last year and in line with our expectations, we've seen less consumption variability this year and so as in Q3, we forecasted less of a seasonal impact.
Than in prior years.
And Thats exactly what we saw.
Turning to non Atlas revenue exceeded our expectations in the quarter and we continue to have success selling incremental workloads into our existing EAA customer base.
The revenue outperformance was in part a result of more multiyear deals than we had expected as a reminder, the term license component for multiyear deals as recognized as upfront revenue at the start of the contract and therefore includes term license revenue related to future years.
Turning to customer growth during the fourth quarter, we grew our customer base by approximately 4500 customers sequentially, bringing our total customer count to over 47800, which is up from over 4800 in the year ago period.
Of our total customer count over 7000 are direct sales customers, which compares to over 6400 and the year ago period. The growth in our total customer count is being driven primarily by Atlas, which had over 46300 customers at the end of the quarter compared to over 39300 in the year ago period.
It's important to keep in mind that the growth of our Atlas customer count reflects new customers to <unk>. In addition to existing EAA customers, adding incremental Atlas workloads.
Moving on to <unk>, we had another quarter with our net expansion rate above 120%. We ended the quarter with 2052 customers with at least $100000 in <unk> and annualized MRI, which is up from 1651 in the year ago period.
We also finished the year with 259 customers spending $1 million or more annualized on our platform compared to over 213, a year ago.
Moving down the income statement I'll be discussing our results on a non-GAAP basis, unless otherwise noted.
Gross profit in the fourth quarter was $353 6 million, representing a gross margin of 77%, which is down from 78% in the year ago period.
As we said at the time, our gross margin in the year ago period reflected a onetime benefit of roughly two five percentage points related to one of our cloud partner contracts.
Our income from operations was $69 2 million or 15% operating margin for the fourth quarter compared to a 10% margin in the year ago period, our strong bottom line results demonstrate the significant operating leverage in our model and our clear indication of the strength in our underlying unit economics. The primary reason for our operating income results versus <unk>.
<unk> is our revenue outperformance.
Net income in the fourth quarter was $71 1 million or <unk> 86 per share based on $82 9 million diluted weighted average shares outstanding. This compares to net income of $46 4 million or <unk> 57 per share on $80 8 million diluted weighted average shares outstanding in the year ago period.
Turning to the balance sheet and cash flow. We ended the fourth quarter with $2 billion in cash cash equivalents short term investments and restricted cash.
Operating cash flow in the fourth quarter was $54 $6 million and $121 $5 million for the full fiscal year 2024.
After taking into consideration approximately $4 1 million in capital expenditures and principal repayments of finance lease liabilities free cash flow was $50 5 million in the quarter. This compares to free cash flow of $23 8 million in the fourth quarter of fiscal 2023.
For the full fiscal year 2004 free cash flow was $109 9 million compared to negative $24 7 million in fiscal 'twenty three.
I would now like to turn to our outlook for the first quarter and full fiscal year 2025.
For the first quarter, we expect revenue to be in the range of 436 million to $440 million. We expect non-GAAP income from operations to be in the range of $22 million to $25 million and non-GAAP net income per share to be in the range of 34 to 39.
Based on $83 8 million estimated diluted weighted average shares outstanding.
For the full fiscal year 2025, we expect revenue to be in the range of $1 9 billion to $1 93 billion.
non-GAAP income from operations to be in the range of $186 million to $201 million and non-GAAP net income per share to be in the range of $2 27.
To $2 49.
Based on $85 1 million estimated diluted weighted average shares outstanding.
Note that the non-GAAP net income per share guidance for the first quarter and full fiscal year 2025 includes a non-GAAP tax provision of approximately 20%.
I'll now provide some more context on our guidance starting with the full year fiscal 'twenty five where we're facing difficult compares in two ways.
First we expect to recognize close to zero revenue from unused Atlas commitments in fiscal 'twenty five compared to over $40 million in fiscal 'twenty four as you may recall in fiscal 'twenty four we changed our sales incentive structure to reduce the importance of upfront commitments and so we saw far fewer upfront commitments. Therefore, as those fiscal 'twenty five four deals.
Up for renewal in fiscal 'twenty, five we expect to see limited revenue related to unused commitments.
Second in fiscal 'twenty, four we recognized approximately $40 million more in multi year license revenue than we did in fiscal 'twenty three as.
As you know our fiscal year 'twenty for non Atlas revenue benefited from a higher than usual amount of license revenue related to multiyear contracts, including our extended partnership with Alibaba.
Clearly we are pleased with fiscal 'twenty for performance, but it was unusual in terms of the magnitude of multiyear deals and we don't expect similar performance in fiscal 'twenty five as a result, we expect non Atlas revenues to be modestly down in fiscal 'twenty five.
Next we expect Atlas consumption growth to be in line with the consumption growth we've experienced in fiscal 'twenty four.
Finally, I want to provide some context to better understand our operating margin guidance to.
The $80 million of fiscal 'twenty for revenue that won't repeat in fiscal 'twenty five was very high margin, making for an exceptionally tough operating margin compare.
Speaker Change: In addition, as we mentioned in the past in fiscal 'twenty, four we began increasing our pace of hiring relatively late in the year. So the full cost from those investments will impact our fiscal 'twenty five operating margin were.
We're expecting head count growth in the mid teens versus 9% growth in fiscal 'twenty, four and as Dave mentioned, we are prioritizing growth and sales productive capacity.
Consequently, we expect to see a year over year operating margin decline, while still delivering 500 basis points of margin expansion on a two year basis.
Speaker Change: We believe this is the most appropriate way to understand our continued margin progression.
Moving onto our Q1 guidance a few things to keep in mind.
First we expect Atlas revenue to be flat to slightly down sequentially Q1 has two fewer days in Q4, this year, which represents a revenue headwind.
Also the slower Atlas consumption growth during the holidays will have a bigger impact on Q1 revenue than it did in Q4, thereby negatively impacting sequential revenue growth.
Finally, the sequential impact from the expected decline in unused Atlas commitments will be most pronounced in Q1, given that we made the changes in Q1 of last year.
Second we expect to see a meaningful sequential decline in EMEA revenue.
As discussed in past years, Q4 is our seasonally highest quarter in terms of our renewal base, which is an excellent indicator of our ability to win new business in Q1, the EA renewal basis sequentially much lower.
Finally, we expect operating income declined sequentially due to lower revenue as well as our increased pace of hiring to.
To summarize <unk> going to be delivered strong fourth quarter results. We're pleased with our ability to win new business and see stable consumption trends in Atlas. We remain incredibly excited about the opportunity ahead, and we'll continue to invest responsibly to maximize our long term value.
With that we'd like to open it up to questions operator.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone.
To ask a question. Please press star 111 moment for our first question.
Our first question comes from a lot of sang Jin sang of Morgan Stanley is open.
Thank you for taking the question Mike.
Michael I wanted to walk through the guidance with you a little bit.
Speaker Change: This time last year coming out of <unk>.
Q4 'twenty three.
Pretty different environment, a much more cautious environment I think usage growth was particularly impacted in Atlas last year this year coming into fiscal year 'twenty five.
Feel a little bit healthier or at least stable internet on how you guys are framing it and yet the guidance. The initial guidance you guys looks a lot like initial.
Initial guidance for last year I'm, just trying to understand I know you talked.
What about some of the onetime impacts from last year, but just in terms of a better spending environment versus the initial guide that looks also pretty similar to last year can you sort of.
Frame out like the conservatism that you have embedded in guidance.
Yes, I think the key thing is once you adjust for those one time items that we called out we see a stable environment. That's what we described.
<unk> experienced in Q4.
Compared to Q3, so we feel good about that I think just to underscore there is the $80 million in revenue that won't repeat both from the unused commitments as well as from the multi year deals and when you adjust from knows we feel good about the dynamic to.
To your question, which is sort of embedded in that around sort of I'll call. It guidance approach our approach to guidance.
We haven't changed our view.
As it relates to guidance.
We have seen more stable consumption that obviously gives us higher confidence in part given the less variability that we've seen over the course of fiscal 'twenty. Four I think we also have a better understanding of the underlying seasonality of the business.
We had updated at the end of last year.
In our call on our Q3 call.
Around the success that we're having on EMEA and we had updated those new business assumptions and so that our guidance reflects continued strength. There. So I think thats, how we approach, but there are no fundamental changes, but hopefully we've given you a fair amount of the piece parts of people can do the math.
Yes, I really appreciate that and thank you for breaking out.
At $80 million between.
These commitments in the multiyear term license deals on the unused commitment side of the house that $40 million can you give us a sense of like how would that flow through to the balance of the year obviously.
Instead of a <unk> in Q4, but the prior year in Q4, you also mentioned a several million dollar impact.
Outlets that quarter was that impact worse or better this year, when we think about the unused commitments contribution to this quarter's results.
Yes, So I think the key thing is the $40 million will happen over the course of the year and obviously attracts too.
The.
Two the actual contracts it affects a relatively small number of customers in a small percentage.
The commitments.
Dynamic that goes away over time.
As we've discussed.
We do we particularly called out.
Debt on a sequential basis, it'll be most obvious and most pronounced in Q1.
Because we're basically hitting the first wave of those renewals, where we don't have commenced and.
And so, especially as people are trying to do the sequential math, we just wanted to call that out and make sure people sort of understood.
That dynamic.
Understood Congrats on the Q4.
Thanks.
Thank you one moment please.
One moment.
Raimo <unk>.
Of Barclays. Your line is open.
Thanks.
Thank you.
Congrats on a nice Q4.
Question also a little bit on guidance Mike.
Like the last two quarters before Q4, we talked about E seeing a little bit of tailwind from customers.
Speaker Change: Maybe modernizing on prime minutes, rather than going to Atlanta to kind of still modernized, but maybe not spending all the money to go to the cloud.
Is that trend still valid.
And if you think about the multiyear commitments, obviously you had to what 10.
$10 million to $15 million.
Barbour deal, but in the other stuff is like customers that are just skewing. This work do you think that will change and people go back to like shorter commitments or is it just more that you're kind of thinking about the renewal point. Thank you.
Yes, so a few different things embedded in there on the multi year.
He has been a dynamic and as we've seen.
Deals are variability, we've tried to call that out and that's why we sort of call out given under the ASC 606 that increased variability and reduced comparability that comes from EMEA, Obviously Atlas has grown as a percentage of the business, but that continues to be the dynamic for the EAA portion.
Expect that we will continue to see multi year deals.
But we just in fiscal 'twenty four it was just so many more than we thought and to your point not just EMEA, but broadly non atlas.
And it's just it's.
Not something that will repeat in fiscal 'twenty, five and so thats why we wanted to call it out and quantified it on the first part of your question on modernization.
The way I would think about it is customers all have their own it.
Strategies, including deployment, including their cloud postures and things like that.
For them to decide we want to make longer to be easy for them to consume.
Our run anywhere strategy has proven to be successful and <unk> seen that in the EAA.
Performance.
And so I think the other thing I'd add is we have increasingly seen people appreciate even if they are operating in a new business or maybe in a regular regulated environment, where they cannot fully move to the cloud where they do want to start to modernize applications and modernize infrastructure and monger DB is seen enterprise advance.
Is seen now as an on ramp to the cloud even if you can't fully.
Modernize and put yourself into a public cloud setting can help that because eventually given the run anywhere strategy will make it easier for your ultimate moved to the cloud if thats, what you wind up doing.
Okay perfect. Thank you.
Thank you again, ladies is asking me a question please press star.
We please ask that you do limit yourself to one question and a follow up one moment for our next.
Thanks.
Our next question comes from the line of cast wagon of Goldman Sachs. Your line is open.
Thank you very much congrats on the results one quick one for David One public we'll go to Michael as well.
You've talked about generative AI applications. You described the three layer architecture. When do you think it hits the sweet spot of how <unk> positioned from a timing standpoint, <unk> generative applications start to really drive underlying need for the kind of databases that you are best suited for one for Michael.
In your assumptions I would.
Takeaway the $40 million of the upfront.
A couple of percentage points of growth.
Im just trying to understand what kind of consumption trends you are using to build guidance was it average fiscal 'twenty four consumption trends are weighted more towards the second half or exiting fourth quarter any color there would be tremendous views and also want to ensure that sales force is still selling.
Ken get comp for a year because it does not look like anything much.
Wait for in your forecast that's it for me. Thank you.
If you played with chat GPT or any of the other.
Chat bots out there or large language models, you'll know that the performance of these applications you to get response time and the one to two to three seconds, depending on the type of question, you're asking and it's a <unk>.
Naturally a chatbot is a very.
Simple, but easy to understand use case, but to embed that technology into a sophisticated application, making real time decisions based on on on real time data the performance and the <unk>.
And to some degree the cost of these.
Architectures are still not there also customers are still in the learning phase.
They are experimenting they're prototyping, but I would say youre not seeing a lot of customers really deploy AI applications.
At scale.
So I think it's going to take them I would say this year is a year, where theyre going to do.
We rollout a few applications learn and then as we get more experience become more comfortable in rolling out more and more applications as they get as these technologies mature and the costs come down we feel very good about our positioning because from an architecture point of view the document model the flexible schema the ability to handle.
Real time data performance at scale, the unified platform the ability to handle data metadata and vector data with the same query language same symantec's et cetera is something that makes us very very attractive. The other thing that we're finding is unlike a typical sale where someone's deciding to either build a new workload or monetize the workload. The AI decision is.
More of a central decision centralized decision more than ever so it allows us to actually go higher in the organization. So we're actually engaging with customers at much more senior level. Because obviously this is coming down as a top down initiatives and so this allows us to position us as a very modern platform designed for these new modern use cases in <unk>.
Workloads, so we feel good about our positioning but as I said this year I think it's going to be.
Continued experimentation and rollout of some individual applications.
And then on the consumption questions Kash. Thanks for that overall, if you look at the guidance and the piece parts that we've tried to share with you when you take into account the $80 million of impact.
From the unused commitments and the multi year.
Outperformance.
You'll see at the top line level around 500 basis points of a headwind.
And then we also walked you through our expectations.
The non outlets will be.
Modestly down given the $40 million of that part that isn't recurring so when you kind of piece all of those together, you'll wind up probably coming to a conclusion that atlas looks consistent from <unk>.
<unk> growth standpoint, and Thats in line with the stable trends, we've seen over the course of fiscal 'twenty four.
So we're using those fiscal 'twenty four numbers, obviously, there are some seasonal adjustments that we have factored in there, but thats really what were seeing there and then the last part of your question around EMEA.
We are we do still sell EBITDA, we don't tend to sell EEA into new accounts it tends to be into an existing account.
Spanning their mongo DB footprint sellers do get compensated on EMEA.
In part it goes back to the comment from the.
The earlier question that our sales rep really can't dictate.
Deployment.
Environment at a customer and so they get paid on that.
And to your comment about the sort of.
EAA results our expectations, that's really just as a result.
The difficult compare in part given that multiyear dynamic.
Thank you one moment please.
Okay.
Our next question comes from the line of Brent bracelet of Piper Sandler Your line is open.
Good afternoon. Thank you, Michael we're going to stick with the guide here I look at last year, you guided to I think 16% growth you ended up during 31 for the full year, even if I take out the $80 million tailwind you talked about it's still 25% growth.
Youre guiding to 14% growth each year again, 5%.
Headwind so closer to 19% organically are you more confident kind of going into this year than last year. Just as you think about the trends is a 14 comparable to the 16 initial guide last year as it is it really more like 19.
Adjusted basis, comparing to 2016, I know, it's a little confusing, but getting a lot of questions on it.
Yes, yes, no that's fine.
I'd go back to what I said in response I think it was <unk> question.
<unk> been no fundamental change or approach in terms of how we're.
Looking in determining our guidance I do think to the confidence point.
Think that that is correct, we do have more confidence we have more data.
If you think back a year ago as one of the questions indicated there was much more macro uncertainty I think over the course of fiscal 'twenty. Four we saw narrower variability we saw more consistent results that does give us increased confidence I think we also have another year under our belt in terms of under.
Speaker Change: Standing the seasonality trends of Atlas I know Atlas is a big business, but it's still a relatively young one, especially when you think about getting quarterly data points and so I think we have more confidence in better handle on that and then lastly.
While there is a difficult compare on EAA.
I think we talked about this in the second half of last year. We were at some point you can only be continue to be surprised by so much.
And so as we looked at our I think it was in our third quarter call. We talked about how we were.
Upping our views on what.
Could do.
Speaker Change: So all of that sort of baked into the guide.
Helpful color there and then just Dave as you think about the million dollar question. When do you think these AI tail wins for the interest in vector starts to really impact your business. It sounded like you think that you will see another year of more experimentation and before.
Four we see big production moves is that the right take will walk us through your current thinking on when AI really start to show up in your business. Thanks.
Yes, I think it's because it's going to show up in our business. When people are deploying AI ops scale right. So I think that's going to be at least another year, but that being said, we do see some really interesting startups, who are building on top of <unk>. So it gives us confidence about our platform fit for these sophisticated workloads, but given.
All of the noise around AI you have to remember we're still in the very very early days.
The performance of some of these systems is I would classify as okay not great. The cost of inference is quite expensive. So people have to be quite careful about the types of applications. They deploy.
There's some debate about open versus close sourced llm's do they use use case specific LMS or more general purpose LMS. So theres a lot of learnings going on and obviously.
There was announcement today that yet another company have delivered better performance in GPT for so people are there is a lot going on this space. So for people to really get comfortable and picking a stack and deploying.
No.
Workloads and mass is going to take a bit of time.
There are obviously.
Some outliers, who are obviously being far more aggressive, but that's essentially what we see across our customer base, but the good news is that we feel like we're well positioned we feel that people really.
Resonate with a unified platform.
Speaker Change: One way to handle data metadata and vector data.
That we are open are composed of all that we integrate to not only all the all of the different LMS, we ingrate to different embedding models and we also.
Essentially also integrate with some of the emerging application frameworks that developers want to use so.
So we think we're well positioned and youll see us continue to expand and broaden our reach in this category, but I do think it's going to take a little bit of time.
Makes sense. Thank you.
Thank you one moment please.
Our next question comes from a lot of call tiers of UBS. Your line is open.
Okay, Great maybe one for Dave and one for Mike Dave just because my first question follows on that I'll go to you first.
Certainly some voices in the industry that would argue that even in advance of AI applications being deployed at scale, which you just said it might take a year enterprises might look to spend more to modernize their existing data stack and.
Data readiness in advance of those AI apps going into production are you are you seeing any of that type of behavior that could proceed in production deployment timeframe.
Yes.
Speaker Change: A little bit about relational migrations, I mean, thats, one way, where a lot of people have feel like they have a lot of data trapped in these legacy platforms. As we shared we've always had customers migrate from legacy sequel apps to monitor b, but the hardest part was basically rewriting the application.
Generative AI essentially lowers the cost to do so.
We're running a bunch of pilots with customers customers are very aligned we have access to senior level decision makers and we're learning a lot. Obviously you are learning about the effectiveness of some of these AI technologies, we're learning about how you have to handle.
All languages, all libraries, all packages the different versions and.
And so the <unk>.
Our ability and all that.
Makes it clear that this will require a mix of product and services product alone today will not solve the problem. So we do think this is.
Speaker Change: A big opportunity, but we are in the early days and.
As I said in the past even when.
Let's talk to investors about this pre AI.
No big Red easy button to press to kind of migrate a sequel app to market <unk>.
And while <unk> it makes that easier, it's still going to take a little bit of time, but it's definitely exciting and there's a lot of customers leaning in and so.
We're excited about the opportunity with a lot of work to do yes, okay. Thanks, Dave and then for Mike Mike could you just because we're all trying to set up our models by quarter for fiscal 'twenty. Five is there any way to be more descriptive about how that $80 million.
The sum of those two pieces.
<unk> by quarter and in particular, how much of the 80 million landed in the fourth quarter you just reported.
Yes, so I don't have a quarterly breakdown I guess, what I would offer is throughout.
Our life as a public company, including over the <unk>.
Three prior quarters of this year when there have been unusual trends, we've tried to call them out.
Speaker Change: So that people could understand both what was driving the results and looking forward what would impact the compares.
And so.
I think our historic comments should sort of leave a pretty good breadcrumb trail.
Relative to things I think we've been very clear on the.
Multiyear deals and the EBITDA outperformance and when that's happened and if you needed sort of.
Rule of thumb.
Credits would typically unused credits or unused commitments would typically.
To the renewal cycle.
And we've called out the various seasonality as it relates to that so those would probably be the big things on the EAA.
And other non Atlas, obviously Q2 last year was a big quarter, we talked about Alibaba and other deals that hit in Q2.
And so I think you can it's not.
I wouldn't just divide by four there are some differences quarter to quarter and then lastly, we did call out the.
For folks who look at the business on a sequential basis.
The impact of Atlas on the Atlas numbers for Q1, given that there'll be a much more pronounced effect. Given this is the first quarter, where we will see the impact of that change.
Okay awesome, Thanks, a lot.
Yes.
Okay.
Hey, Bill.
Can you guys can you hear me because the lines coming out of it.
Yes, we can hear you. Unfortunately, we can't hear the moderator, but we can hear you.
Terrific Okay.
Thank you for having me on I would like to ask about <unk>.
Our stream processing, so that was announced in June 2023.
Can you just remind us like what is mangoes reason to win in that segment of the market and then any idea of when that product will likely go GA.
Yes, so we.
We announced as you said, we announced the private preview of stream processing and where we ended up having hundreds of development teams use the product now we're in a public preview so.
If customers are interested they can actually start using the product today.
Why are we in a position to win a couple of reasons. One. This is purely focused on developer market. The data is mainly and Jason It requires a flexible schema is for real time applications given all of those things are kind of core.
Coordinating we feel really well positioned because most of the alternatives have very rigid or fixed schema and with the variability of the data coming from these kind of events that becomes much more problematic for customers to manage so we feel very good about our position there in terms of timing of when we're going to go we're just.
Candidly getting feedback and responding to feedback and we want to be very sure that we've addressed.
Kind of the low hanging fruit before we go.
Generally available, but we're really excited about the opportunity that stream processing offers us.
Okay.
It's also a follow on to that and then.
I had in my kind of second question follow on is.
As that stream processing embedded in the guidance for fiscal 'twenty five and then.
Question I had is about the bottom line the guidance if I'm not mistaken it's at 10%.
<unk> and fiscal 'twenty five.
Using the same because you guys did.
This year, so six points a beat.
Put us at about 16 points of op margin exiting fiscal 'twenty five so kind of net net flat year on year.
Is that due to this kind of.
Putting the foot on the gas in terms of hiring and really trying to be aggressive kind of adding head count.
Thank you.
Yes so.
A couple different questions. There, let me try and get them. All so obviously our plans related to stream processing are included.
In our guidance.
We don't.
Most of that will show up.
In Atlas overall, when you think about the results and certainly whether it's new workloads or anything else. They tend to start off small and grow quickly.
And those first couple of quarters, but.
I wouldn't think of it as a major move that needle mover in the context of the fiscal 'twenty five.
Our results, but we're very excited about it over the long term.
In terms of the op margin.
Yes, our guidance is.
To go backwards on operating margin relative to fiscal 'twenty four it will.
<unk> and 500 basis points improvement over the two year basis, and the thinking and the rationale related to that is the fact that if you take a step back and you look at us relative to the IPO.
We had mapped out meeting around 55 points of margin improvement to get to our target margins.
With the fiscal.
24 results, we effectively delivered 50 of those 55 points and yet are still at 2% market share and so it makes sense to continue investing in the opportunity, particularly on the sales productive capacity as we talked about but also to execute against our product roadmap.
And so we will continue to do that and that will take us backwards relative to last year, but positive 500 basis points on the two year basis.
Thank you so much.
Thank you one moment please.
Okay.
Our next question comes from the line of Rod sales of Bank of America. Your line is open.
Oh, great. Thank you so much I wanted to ask a question around the sales capacity it sounds like at some point last year, you realized that you had underinvested, maybe pivoted too much towards margin expansion and then are now catching up.
In the guidance if you could.
Assuming you have the sales capacity that you would prefer to be at this point given the demand that youre seeing.
Would we be at a higher level of growth I'm, just trying to parse out how much of the guide is factoring in those.
Those constraints on sales capacity that you've talked about.
Yes. So thanks for your question, yes, we given the macro uncertainty, especially coming out of.
Q4 of last year, we did slow down hiring.
Quite meaningfully and obviously that showed up in our numbers to the point that Michael talked about it in our op margin as well.
We obviously know that we have a big opportunity in front of us. So we are growing our head count between the mid and high teens, we think that's appropriate relative to the opportunities we see and yes. If we had more productive sales capacity the guidance would probably be higher there's no question about that.
Yes, I would just Brad I would just make sure it's clear.
The slowing down in hiring was really macro related.
And just sort of concerns about the environment. If you think back then there were broad scale layoffs happening.
Across the industry and everything else that obviously, we successfully weathered the storm.
Think we talked about on the last call.
With the benefit of hindsight and the results that we put up and how quickly at least for us things stabilized.
We.
Could have started investing sooner and so I think in the call the year ago call, we talked about adding single digit.
Head count growth relative to I think 30% head count growth in the prior year, we wound up at 9%. So obviously at the high end of what would constitute single digits in part because of the.
The stabilization that we did see but to the comments that effect. The op income guide and everything else that was very backend loaded right. So those investments will will much more effect the fiscal 'twenty five P&L and Thats really what were lower reflecting into.
Understood. Thanks, so much for that and then one more if I may. Please you guys have such broad exposure to different industries.
With the advent of AI coming into your business and some of the early progress Youre seeing are there any verticals that you would point to where you're seeing more activity, perhaps than others. Any use cases, you might point to just to give us a sense for where that early adopter.
It might come from thank you.
Yes.
<unk> use cases, we're seeing most customers focus on driving.
Efficiencies in their business because.
They are existing baseline of costs are well known so it's much easier for them to determine how much value. They can derive by using some of these new AI technology. So I see the first wave of.
No.
Applications being around reducing costs, you've seen some announcements by some customers are saying.
Focusing on things like customer support and customer service there really have been they have found ways to dramatically reduce the costs. That's not surprising to me I think cogeneration and just increasing developer productivity is another area. I think those are going to be kind of two areas, where there is low hanging fruit, but then I think you're going to seek customers focus on delivering better experiences for their.
Customers and then find new streams of growth and so I think it will become in phases and so in terms of across industries. I think it's obviously, there's some constraints on some customers based on the regulatory regulated nature of their industry, but in general we see basically.
High interest across almost every industry that we operate in.
That's exciting thank you so much Dave.
Thank you.
Thank you.
Our next question comes from the line of Rishi <unk> of RBC.
Okay.
Wonderful.
Hey, Michael Thanks, So much for taking my question I wanted to first start with relational migrate or Dave can you talk a little bit about.
Kind of what demand for that looks like and when customers are talking to you are they more focused around the value prop being around cost savings that they get from moving from legacy <unk>.
Relational databases over to Margaret maybe a bit more about the flexibility around.
The technology itself and maybe if you could tie in how you expect now with Jenny is an accelerator how that can impact the timeline of migrating workloads from relational over to Margaret <unk> adequate follow up for Michael.
Sure when we talk to customers and remember even at our IPO, we had a meaningful number of customers migrating off relational to monitor b. So they tend to come in three categories of reasons why.
First is that the data models become so brittle with their relational architecture that is very hard to build new features and be responsive to their customers and so they just feel like their ability to innovate has slowed down. The second reason is that the system is just not scaling of performing given the increased number of users of the large amount of data.
They have to process that they realize that they have to get off of legacy platform and the third reason is just the cost of the underlying platform and relative to the ROI that application is providing so typically falls.
And one of those three buckets, sometimes customers, we have all three or maybe two to three that are driving that demand and then there is typically some compelling event, maybe theres. Some milestones I want to hit maybe there is a renewal coming up with the incumbent vendor that's driving them to potentially move off that vendor as quickly as possible.
As I've said with relational migrated there's three parts to it this mapping of the schema from.
Tabular relational schema to a document guest base schema and Montney DB, then is actually moving the data mapping to the new schema and then there's the rewriting of the application and so we have done lots of those already pre gen AI and some customers take a I want to rewrite everything some customers take a I'll do it on a micro services based as well.
Dropped peeling off functionality of the existing application and move it and move that functionality to the new application and do that over time, it really depends on the customer's use case and their business needs and yes with <unk>, we do expect that rewriting their applications has become.
Easier and hence lower the cost of essentially switching which by definition then expands the amount of customers and workloads. You can go after the other thing I would say on top of the three reasons.
I gave you in terms of why people move this now in the emerging fourth reason, which is enabling their data and their applications to be more AI enabled and so it's not just moving to a more modern platform, but making them more AI enabled and so thats also something thats getting customers interest and to your question on timing as I said I think this year as it were.
Speaker Change: See a lot of pilots and people trying out these new AI capabilities and I think as as that as the technology improves as we learn more.
I think you're going to see that scale much more quickly after that.
Wonderful very helpful on that Michael just quickly.
You put up your first free cash flow positive year public company history, just as you think about the margin guidance for next year, how should we be thinking about cash conversion going forward. Thanks.
Yes, so I think the two factors to think about in terms of cash conversion are.
Within Atlas there is this dynamic where we're reducing and continuing to see less upfront Atlas.
Obviously were hitting the anniversary of that.
And thats whats, creating the headwind on the revenue front and a tough compare but.
With Atlas at 68% of revenue and so if you assume that Atlas is going to increase as a percent of revenue I think that will sort of further draw.
Drive the divergence and then the only other.
Big Delta as things related to SBC and stuff like that but I think it's the Atlas dynamic when you think about potential changes from a cash conversion standpoint.
Is where I'd focus in the impact.
If you assume that ours is going to be a larger percentage of the business.
Alright very helpful. Thank you guys.
Thank you.
Please.
Comes from the line of Tyler Radke of Citi. Your line is open.
Hi can you hear me okay.
Hey, Tyler.
Okay cool.
Okay.
And with little choppy up.
Dave.
Wanted to ask you just a question as it relates to.
Competition, obviously been a busy week at both Snowflake and data Briggs with Frank's Hootman.
Retiring and I hope you are not going anywhere soon.
Speaker Change: But it.
David Brooks announcing.
<unk>.
Greg I guess, how do you kind of think about your positioning relative to the two vendors, especially with the new CEO kind of more of a technical focus it see snowflake.
And.
Newly stored product coming out later this year do you expect.
Compete more just just frame for us how you.
Youre thinking about it especially in.
The Gen add momentum.
Speaker Change: Leases over the coming years.
Yes, so first of all I'm very committed to going to be very excited about the opportunity here. So I have no plans to go anywhere.
Second in regards to snowflake and data breaks.
And we don't typically compete with them right because they are focused on analytical workloads, where our focus on operational workflows. So those are two very different sets of use cases, the big difference in terms of how customer by typically.
Data warehouses and data lakes tends to be a centralized decision organizations standardize on one platform and then basically move their existing data to those platforms, where I would say operational platform tends to be a more decentralized decision where different development teams.
Different lines of businesses et cetera, based on the requirements for their application will choose will make their own independent decisions about what they think they need to do and we've always talked about how we start with one team and then try and expand from there and why there's so much focus on expanding when the accounts are becoming a standard within the accounts because then that accelerates them.
Out of workloads recapture but those are two very different kind of customer buying behaviors in terms of analytical versus operational.
With regards to the.
The potential overlap we are embedding more analytics capabilities, we have a very sophisticated aggregation framework. So people can do real time processing of analytics on our platform with real time data remember data lakes and data warehouses have a batch process to get that data into their platforms. So they're not dealing with the.
Speaker Change: Real time data and then with regards to you in the store.
Listen.
That's like over 300 databases in the marketplace, so not sure.
I have a lot of respect for the sofa people I'm not sure.
We've heard noises about unit store for a long time, but we feel very comfortable and confident of our position just given the investments we've made in our platform and the large customers, we have and frankly the popularity of our platform of developers and remember developers are not a persona that these other players typically go after they go after more than analysts and data scientists community.
We're very very focused on developers.
Okay. That's helpful. Michael just a quick follow up for you on the old Bridge comments, you made I guess.
Couple of questions first of all the $40 million.
You called out.
Pretty high.
Our last year.
We havent really heard about it.
<unk> of last year, we called out only several million dollars over it's kind of I guess can you just frame for us.
Was that consistent with what you've seen in prior years.
And I guess.
You're obviously embedding that that doesn't continue next year is that a change in the way that year.
Recognizing overage revenue or is that just you don't expect that to happen because all your contracts.
Thank you.
So just two quick things in the interest of time, so reminded the several was the incremental amount over and above the normal amount that we experience. So that's sort of the principle that we take where were trying to call out.
Differences or variations from sort of the normal behavior and so it was several million dollars more than what we would normally see the $40 million is the amount that was recognized.
In fiscal 'twenty four.
Do you see that.
Going to zero effectively.
And Youre right Thats directly as a result of the changes that we've made in the go to market and the fact that we are not.
Prioritizing commitments.
Speaker Change: And haven't since the start of last fiscal year.
So as a result of that is you have many fewer commitments and unused revenue for unused credits simply just reflects the revenue at the end of that contract period that you havent realized or recognized through consumption.
So we expect that to go away because we've taken a different approach to the market to drive.
Greater adoption of workloads and all the other things that we've talked about which was the rationale for doing that in the first place. So hopefully that helps put all that in context.
Okay.
It does thank you.
Thank you.
That does conclude our conference for today I'd like to turn the call back over to Dev.
CEO for any closing remarks.
Thank you again, thank you everyone for joining us today I just want to reiterate that we had a strong quarter and year as we execute on our opportunity. We do expect fiscal 'twenty five to play out similarly to fiscal 'twenty four with a healthy new business and a stable consumption, but then stable consumption trends. We are very excited about the long term opportunity, but still believe its early days as customers.
Mainly in the experimentation and prototyping stages of building applications and our priorities for fiscal 'twenty five or to invest in deepening our product advantage, while remaining focused on acquiring new workloads and established establishing ourselves as the standard for building modern applications. So thank you again for joining us and we'll talk to you soon take care Bye bye.
Okay.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.
Okay.
Okay.
Yes.