Q2 2020 Earnings Call
Good day, ladies and gentlemen, and welcome to today's Mako de <unk> second quarter fiscal 2020 earnings call.
I'd like to remind everyone that this conference is being recorded and at this time I'll turn the floor over to Brian Denyeau I see our Investor Relations.
Thank you Greg good afternoon, and thank you for joining us today to review Mama Mongodb second quarter fiscal 2020 financial results, which we announced in our press release issued after the close of market today.
Joining me on the call today are David a cherry, our president CEO of Mongodb, and Michael Gordon Mongodb, <unk> COO and CFO .
During this call we may make statements related to our business that are forward looking under federal Securities laws. These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Including statements related to our financial guidance for the third quarter and full year fiscal 2020.
Our market opportunity the opportunity created by and scalability of our go to market and growth strategies.
The potential advantages of our new products product enhancements implant integrations, including as a result of our recent acquisition of Ral.
Hi made the transition of M lab customers to Atlas anticipated revenue deterioration from M lab customers.
It doesn't impact the valla sells expansion on our gross margin anticipated investments in the business and their impact on future cash flows.
The words anticipate continued mix estimate expect intend will and similar expressions are intended to identify forward looking statements or similar indications of future expectations.
These statements reflect our views only as of today and should not be construed as representing our views as of any subsequent date.
We do not have plans to update is the update these statements except as required by law.
These statements are subject to a variety of risks and uncertainties can cause actual results to differ materially from expectations.
For a discussion of the material rest other important factors that could affect our actual results. Please refer to those contained a quarterly report on Form 10-Q with the FCC on June 7th 2019, and our other periodic filings with the SEC.
These documents are available on the Investor Relations section of our website at Www Dot Mongodb Dot com.
A replay of this call will also be available therefore limited time.
Additionally, non-GAAP financial measures will be discussed 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 so what else decker directly comparable GAAP financial measure.
And with that I'd like to turn the call over to Dan.
Thanks, Brian Thanks, Brian and thanks to everyone for joining us to review our second quarter results.
Mongodb continued to perform at a very high level driven by broad based strength in all geographies and industries. Our results continue to demonstrate that Mongodb has clearly established itself as the most popular modern database platform of choice in the world.
Our success is being driven by our strong product market fit and the sophistication of our go to market strategy. We're confident that we'll be able to continue to capitalize on our long term opportunity in the 64 billion global database software market.
Looking quickly at our second quarter financial results, we generated revenue of $9.4 million of 67% year over year increase and above the high end of our guidance.
We grew subscription revenue, 71% year over year Atlas revenue grew more than 240% year over year and now represents 30% of revenue and we had another strong quarter customer growth ending the quarter with over 15000 customers.
Our strong results beginning with our best in class product offering we made several significant product announcements that represent notable progress on our long term product vision to make data stunningly easy to work with in June we held our annual user conference Mongodb World in New York and attendance set another record during the conference we unveiled a number of exciting products and features including.
Not really be version 4.2 with key features such as distributed asset transactions and client sites you level encryption.
We believe this latest release further cements our positioning as a modern general purpose database of choice and underscores our capability to support the most mission critical applications.
Mongodb outlets data Lake allows customers to quickly query data on S. Three in any format using the Mongodb Curry language, we believe that other solutions the analytics markets have been plagued by high upfront investments complex implementations and the need for specialized skills by contrast, with Atlas data Lake our customers can leverage their existing mongodb expertise and incur no upfront cost to quickly derive value from their data.
Mongodb full text search gives end users the flexibility to filter Rankin sort their data to quickly surface. The most relevant search results importantly, they can implement this functionality without incurring the effort in cost of preparing their database with an external search engine.
Developers can leverage the functionality to built sophisticated search queries wouldn't applications saving them significant amount of time effort and money.
Finally, we announced a plan to integrate our newly acquired mobile database realm with our service platform Stitch realms synchronization protocol will connect with among these outlets global cloud database on the backend, making realms think a powerful way for developers to connect data device to the devices running their applications.
As part of Mali, TV realm is positioned to become the default database for mobile developers and the easiest way to build real time.
Mobile applications.
These product announcements are formed by a long term vision and ground by feedback from our customers on the strategic value that can achieve by leveraging model to be for a broader set of use cases across their organization.
Our second quarter results also demonstrates our investments in expanding and extending our go to market capabilities are paying off.
Given the size of the market in front of US we have built an increasingly sophisticated three pronged go to market strategy that allows us to pursue the entire database market.
The first component is our fuel sales realization, which drove strong broad based performance in all major regions in the second quarter.
Our success with fuel sales is driven by our ability to recruit and develop outstanding sales personnel and strategically engaged our customers from developers up to Cxos second our inside sales channel focuses on the mid market where deals are smaller with shorter sales cycles. These customers, who prefer a low touch sales model with a high degree of automation have less interest in matching the infrastructure and therefore see compelling value and Atlas. The third component of our go to market strategies, our self serve channel, which has grown significantly as a percentage of revenue over the past year, starting last year, we significantly increased our investment in this town to build a world class developer focus product led growth marketing organization. This is a multiyear journey, but we are encouraged by the progress we are making.
We also see increasingly a synergy across these go to market motions. For example, we have observed developers and large enterprises frequently started evaluating using Atlas. We are self serve channel, which can lead to large opportunities for our direct salesforce. We've also seen fast growing self service customers, who can grow even faster when to interact with our customer facing teams. Moreover, we have observed highly sophisticated midmarket customers some of whom have built their entire business and mongodb, who need a level of engagement typical of large enterprises.
One of the key competitive Differentiators is the freedom to run anywhere and our cloud partnerships enable customers that choose mongodb Atlas to take advantage of the benefits of each major cloud provider as they see fit.
We're off to a strong start with a partial to GCP, we expanded our relation with Microsoft by launching the availability of Atlas on Microsoft Azure marketplace, which will simplify billing for joint customers. Furthermore, we have joined Microsoft strategic partner report HCR Cosell program and this was yet another record quarter for Atlas on eight of us.
I'd like to spend a few minutes reviewing some customer vignettes, we're increasingly seeing a wider end customers choosing money would be to run mission critical applications.
The following is a small selection of customer wins and interesting use cases from the second quarter.
Mongodb is a valued partner to Venmo, then most experienced tremendous growth over the past few years and has decided to partner with Mali TV because of our ability to provide the scale they needed for their growing platform than most leveraging mongodb the enterprise advanced offering to streamline operations and to drive automation.
Halliburton energy services, a leading oilfield services company is adopting mongodb to modernize its high performance rig technology. The Halliburton edge platform connects digital operations, the field orchestrating multiple inbound and outbound data streams and applications to optimize execution the ease of use and flexible scheme. Among the DB enabled the developers to quickly iterate and drive innovation and monetization at the rig site.
An important example of maladies international reach.
Technology leader Hitachi, you signed an agreement to embed mongodb in their new products. After evaluating several other database platforms. They chose mongodb for a consistent reputation for reliability scalability and performance.
Dream Miss a subsidiary of SK Telecom the number one telco in Korea.
Recently replaced my sequel, with with model to be for the New Mobile music service flow Dream has made the decision to switched and mongodb because of the limitations of his relational database to scale and marketing is flexible scheme of data model as well as our future plans for managed cloud service.
Conrad electric European retailer of electronic products based in Germany, and one of Europe's top 10 online shops, plus self managing monetary community in the cloud, but recently decided to move their models to be environment to Atlas.
They are not only saving on overall infrastructure costs, but can also focus their developers time on high value test instead of database management.
The breadth and depth to monitor these deployments around the world demonstrates our success as the modern data platform of choice to summarize Mongodb continues to perform at a very high level, we believe the increasing sophistication or go to market strategy and expanded product portfolio position us well to continue delivering high revenue growth rates for the foreseeable future. We're focused on executing against our strategic priorities and ensuring we capitalize on our market opportunity.
With that let me now turn the call over to Michael.
Thanks, Dave as mentioned, we're very pleased with our second quarter performance I'll begin with a detailed review of our second quarter results and then finish with our outlook for the third quarter and full fiscal year 2020.
First I will turn to our second quarter results.
Total revenue in the quarter was $99.4 million up 67% year over year.
Subscription revenue was $94.2 million up 71% year over year and professional services revenue was $5.2 million up 15% year over year.
While we performed well above our expectations in the quarter, we would like to note that our results also benefited from a few meaningful enterprise advanced transactions than we had expected to close in the third quarter.
Under assay success X, we are required to recognize the upfront term license revenue from these contracts in Q2, when we had expected to realize them originally in Q3.
Our second quarter performance reflected positive contributions from every region and strong adoption of both enterprise advanced and Atlas.
The combination of healthy new logo additions and continued strength that upsell activities provides us with multiple vectors to sustain high levels of growth.
We continue to see rapid adoption of Atlas, which grew over 240% in the quarter and now represents 37% of total revenue compared to 18% in the second quarter fiscal 2019, and 35% last quarter.
Atlas has now reached a nearly a $150 million annualized revenue run rate only three years since its launch which reflects the popularity of I'm going to be and the growing interest to customers of all sizes have in a fully managed cloud database offering.
As a reminder, our second quarter results include the impact of M Lab, which we acquired in November of 2018 at the time of the M Lab acquisition, we said that we expected the M lab business to decline as we transition their customer base to the Atlas platform.
Revenue from M lab customers performed in line with our expectations for a modest sequential decline, which we expect will continue in the second half of fiscal 2020 as planned.
Excluding M lab, we were very pleased with the organic growth of the business overall, which drove the outperformance relative to the guidance.
During the second quarter, we grew our customer base by over 800 customers sequentially, bringing our total customer count to over 15000.
Which is up from over 7400 in the year ago period.
Of our total customer count over 1850, our direct sales customers, which compares to over 1600 in the year ago period the growth in our total customer count is being driven in large part by Atlas, which had over 13200 customers at the end of the quarter compared to over 5300 in the year ago period.
The sequential growth in total customers includes growth in our enterprise advanced customers as well as new Atlas customers is important to keep in mind that the growth in our Atlas customer count reflects new customers to Mongodb. In addition to existing customers, adding incremental Atlas workloads.
We also continue to see healthy expansion from existing customers, which is a key component of our growth strategy.
Our net expansion rate in the first quarter remained above 120% for the 18th consecutive quarter.
We ended the quarter with 622 customers with at least 100000 in air our annualized EMR, which is up from 438 in the year ago period.
Moving down the PNM ill be discussing our results on a non-GAAP basis, unless otherwise noted.
Gross profit in the second quarter was $71.1 million, representing a gross margin of 72%.
Compared to 74% in the year ago period, we are pleased with the efficiencies we're generating in our organic Atlas business as it scales. In addition, we're starting to see improvements in M Lab M lab benefits from Atlas is scale and they're starting to transition M lab customers onto the Atlas platform.
However, we continue to expect that we will see some modest reduction in overall company gross margin as Atlas continues to be a bigger portion of our revenue.
Our operating loss was $14.8 million or a negative 15% operating margin for the second quarter compared to a negative 30% margin in the year ago period.
The more than 1500 basis points improvement in operating margin is particularly impressive given our growth profile and the investments we are making in our business.
Given our strong first half revenue and profitability performance and the numerous growth opportunities. We are targeting our intention is to make incremental investments in sales and marketing and R&D in the second half of fiscal 2020.
Net loss in the second quarter was $14.7 million or 26 cents per share based on 55.6 million weighted average shares outstanding. This compares to a loss of 34 cents per share on 51.2 million shares outstanding in the year ago period.
Turning to the balance sheet and cash flow.
We ended the quarter with $436.6 million in cash cash equivalents short term investments and restricted cash operating cash flow in the second quarter was negative $12.6 million.
After taking into account concern after taking into consideration approximately $1.2 million in capital expenditures free cash flow was negative $13.8 million for the quarter.
This compares to negative free cash flow of $18 million in the second quarter of fiscal 2019.
We are pleased with our cash flow performance year to date, but expect to burn cash in the third and fourth quarter of fiscal 2020, as we continue to make significant investments in the business.
Also given this year's stronger than expected Q2 cash flow performance Q2 may not be our peak quarter for negative cash flow as is typically the case.
As a reminder, the continuing growth of Atlas as a percent of our overall business impacts our reported financials in several ways.
First Atlas revenues recorded on a consumption basis, whereas enterprise advance includes a term license component that is recognized upfront.
Second Atlas has a lower overall gross margin enterprise advance because of its infrastructure component.
That said on an apples to apples functionality basis Atlas is accretive to dollars of gross profit.
Finally, self service at Atlas customers and a growing portion of our direct sales outlets customers pass monthly in arrears versus annually upfront for enterprise advance.
In other words, a growing percentage of Atlas, which is an increasing portion of our own business does not involve an upfront cash payment nor does it impact our deferred revenue balances, we believe that offering customers the ability to pay as they go is a key benefit of the cloud model more broadly we believe the continuing to find ways to facilitate the ease of consumption will ultimately maximize long term revenues and cash flow.
I'd now like to turn to our outlook for the third quarter and full fiscal year 2020.
For the third quarter, we expect revenue to be in the range of $98 million to $100 million, we expect non-GAAP loss from operations to be negative 16, and a half million to negative 15, and a half million and a non-GAAP net loss per share to be in there to be in the range of negative 29 cents to negative 27 cents per share based on 56.4 million weighted average shares outstanding.
As we have mentioned on previous calls our third quarter outlook reflects a notably large compare from the third quarter fiscal 2019, when we signed a higher than usual number of multiyear enterprise advanced contracts.
As a reminder, under assay six us actually recognize the entire term license portion of a multiyear contract at the outset.
The resulting in no recognition of additional term license revenue at the beginning of each new subscription year of the contract also as discussed earlier our results from the second quarter also benefited from a few meaningful enterprise advanced transactions that moved from Q3 to Q2.
For the full fiscal year 2020, we now expect revenue to be in the range of $390 million to $395 million compared to our previous guidance of $375 million to $381 million.
Please recall the fourth quarter will be the first quarter, we will have M lab in the base period and as we've described before we expect continued deterioration in the revenue from former Am lab customers both sequentially as well as year over year. This is all in line with our original investment thesis for the full fiscal year 2020, we expect non-GAAP loss from operations to be negative 62 million to negative $59 million and non-GAAP net loss per share to be in the range of negative $1.11 to negative $1.60 per share based on 55.9 million weighted average shares outstanding.
As mentioned previously we see our strong start to fiscal 20 as another indication to the size. The opportunity ahead of us and we will invest incrementally across our business in the second half to further pursue that opportunity.
To summarize Margaret to be delivered excellent second quarter results were executing well on our product and go to market strategies, which is generating impressive growth at scale. We believe our clear leadership as the modern general purpose data platform of choice will enable us to continue delivering strong growth going forward and with that we'd like to open up to questions operator.
Thank you, Sir and ladies and gentlemen, if you do have any questions. Please signal by pressing star one on your telephone keypad.
If you just make sure that your mute function is turned off to allow us to receive that signal.
Once again this time that is star one.
For any questions.
And first from Barclays, We have Raimo lenschow.
Hey, Congrats from me.
Two questions if I may 1st Steve can you talk.
It doesn't happen often and so for that kind of deals can kind of pulled in.
Assumption for getting pulled in early can you just talk a little bit about the momentum in the quarter and linear TV I mean, given that everyone is nervous that sounds like the opposite of its just talk to that please.
I would say that this quarter was much like most other quarters there wasn't any changes in the arity.
We typically put a lot of rigor in our forecasting process.
And.
And so we have a pretty good sense of how the quarters looking.
And obviously the close of the quarter, we get to the more even more visibility, we have and I would say.
Our sales realizations quite effective at closing deals and giving customers reasons for why they should engage with US now versus later and we feel good really good about that execution.
Yes, Okay, and then on Atlas can you talk a little bit about what you see on the different platforms. Like now that you are kind of on the what does it mean that you are now on the Microsoft marketplace. You talked about early good momentum around Google like just help us understand what's the difference between like being derivatives being on the marketplace et cetera.
Sure and just for everyone's benefit we started in 2016 on on NWS first and then a year later we added.
GCP in Azure I would say that.
Obviously.
I would say Atlas the deployments of Atlas in some ways mirrors, the broader market share of the of the larger cloud providers, but that being said I would say that.
We've been really pleased with the traction were getting with Google.
And Thats really start to accelerate even though the partnership we announced in May has not had a lot of time to gestate, but activity level is very strongly to close a number of deals Google and the the.
Now some of you made with Microsoft basically incentivizes their salespeople.
To basically.
Get paid on Atlas steels. Moreover, our customers can get a unified bill when they buy Atlas via the marketplace and they can apply their azure commitments towards Atlas, which means that did not to go find other dollars to fund.
The workload on Atlas So all in all its a win win for the customer win win for Mike, Mike Self salespeople and obviously a win win for us.
Perfect. Congrats thank you.
And moving on we will take Sangita Singh with Morgan Stanley .
Questions, Congrats Dave and Michael It out I know an excellent first half.
I wanted to pick up from Mongodb World debut you elicited a very ambitious vision around I'm going to be a data platform could you speak to what needs to happen in terms of evangelize thing on that type of story all in terms of like the sales motion specifically you know typically the database market. We've seen on customers go for point functionality for specific capabilities, what would be those what needs to happen to sort of funnel that demand too to more of a consolidated play when we think about some of the things that you're going after around data visualization, a search and those types of I meant more analytical workloads on the multi platform, but what if it happened to trigger to trigger those buying patterns.
Yes, so I would say that while there have been a lot of point solutions built for particular use cases, we increasingly hear from customers that they just can't use a net new technology for every net new workloads or does the scale is hard to get everyone to learn all these new technologies.
Support to maintain all of them and it just adds a lot more costs. So the degree to which they can consolidate their infrastructure under non to see only one platform, but a small number of platforms and becomes more compelling to the customer. So I would say you know for example, our full text search capability basically obviates the need for a customer to buy a disparate search engine to complement their functionality database to basically provide search function functionality on their application.
Conversely for.
Data lake capabilities, rather than having to.
Learn a new technology make some big upfront investment hires very specialized group of people you can leverage the experience and expertise of people that already have on mongodb and basically use the daily functionality to query data on S. Three which is where you where most people are store their data today. So it really allows people to get real reasons for people to use mongodb for a broader and broader set of use cases and remember the database is the heart of every application. So so.
Unlike.
No search where there's some vendors the search space have contemplated becoming a database. They quickly realized that that was not something that was very easy to do Dave there are now trending more towards the op space and going after the systems management market, where I think for the database being the center of gravity, it's much more natural for us to expand from the database to broaden our set of use cases and Thats why we think as Mongodb becomes an obvious choice for modern applications, our ability to expand our use cases will be.
Get better over time and you see these investments in the products that we're making.
Great Thats very helpful and Mike maybe one just quick follow up for you in terms of the pull forward impact of enterprise advanced is there anyway, you can quantify what the impact that was in terms of revenue or billings in the quarter.
Yes, not specifically in terms of a number but I think the key point here is this ties to what we've talked about ever since we adopted six as sex of sort of the increased variability and reduced comparability sort of quarter to quarter and so I think what we wanted to do is just have people understand that we had a couple that sort of fell on the earlier side.
Of the ledger relative to where we were forecasting and that helps put sort of Q3 in context.
Fair enough. Thank you for taking the question.
And moving on we have Brad Reback with Stifel.
Great. Thanks, very much Dave as you think about the three pronged go to market strategy laid out how much bigger do you think self service can get than where it is today.
Oh, we think were just in the early early innings of our self serve journey you know if you remember.
You know, we really started to.
This business with the launch of Atlas and then we accumulated more expertise to the M lab acquisition, because they built their business entirely through self serve.
We finally feel that we have.
In making investments really understand the leavers what drive self serve we have now with you know.
Lots of customers 13 over 13000 customers Atlas, we have a lot more understanding and sophistication around product signals in terms of what customers may be.
Ripe for up sell or cross sell.
But we still feel that we're in the early innings of our journey there.
Great and then just one quick follow up also on on the go to market side last quarter, you talked about very aggressive recruiting efforts on the sell side can you tell us how the hiring process is going thanks.
We've been very pleased we've been hiring like Matt we have a high bar and we will continue to be hiring.
Because.
As I think I've mentioned on many calls you know given the size the market I know we are constrained by the reach that we have and so.
And in many markets, we have very limited coverage and so.
But just hiring salespeople is not enough yet to higher make sure you have the sales management.
Leadership in place.
And you need to make sure you are recruiting infrastructure in place and that once you hire them you can ramp them and get them productive as fast as possible. That's a that's a big priority for us.
We were very happy with them and the number of people, we recruit last quarter, but there is a big push to do a lot of recruiting in Q3 and Q4.
Great. Thanks very much.
Moving on we have Heather Bellini with Goldman Sachs.
Hi, This is Dan church on for Heather Bellini, Thanks for taking my question.
Last quarter I think you mentioned roughly about two thirds of Atlas revenues not reflected in deferred revenue I was just wondering how stable is that number have been overtime.
And do you expect that mix to change as you see increasing enterprise adoption of Atlas.
Yes, So I think the key thing there is what we're trying to give a point in time estimate for folks as opposed to a quarterly metric that we'd read out on but I think in general the direction will be more of that as we as I kind of shared in the prepared remarks.
More and more of Atlas will be on a monthly in arrears basis, both because of the self serve growth as well as trying to make sure that we are reducing any possible.
Barriers to consumption and making consumption as easy as possible.
Including monthly invoicing for years for some enterprise customers for whom that's important so.
I think in general you'll continue to see that be.
Irrelevant consideration and therefore some of the deferred in other ways that you tend to look at some companies being increasingly less relevant.
As it relates to analyzing us.
Thanks helpful. Thank you and as a quick follow up just.
I believe last quarter, you talked about some investments you are making and expanding the channel ecosystem. Specifically this system integrator, so any update or progress on traction there and strategic investments are priorities for investment as we get into the back half of the year.
No things are.
Remained the course, where we're doing a lot of business with the size I think you know we have relations with a number of them.
In fact, I just did a video testimonial with emphasis that was published on lengthen.
And.
We have relations with Accenture with cap Gemini a bunch of boutique players.
The large systems integrators, and obviously each system integrator has certain expertise either in a particular geography or an industry or they have specific account control and so.
So we work well with them and the the synergy there is that in many cases as we all know lot of customers a district are constrained on development capacity and so with the systems that can add value as being the development arm.
Leveraging.
Mongodb and a more modern stack to help.
Customers drive innovation faster in the organization and so we're spending a lot of time, enabling these integrators.
Both at the corporate level and at the field level and.
And building more more proof points and in some cases, you also see integrated themselves build their own specific products embedding mongodb in their technology and so.
So it's a multi pronged effort.
Great. Thank you.
Next from Citi, We have Tyler Radke.
Hey, Thanks for taking my question could you talk about the what you're seeing in terms of enterprise adoption of Atlas It sounds like you're not necessarily seeing.
Enterprises come in and you know to pay for a full year upfront necessarily but maybe just some some comment on the use cases or traction that you're seeing in terms the enterprise in Atlas. Thanks, So I would I would say that we're seeing actually strong demand for Atlas in the enterprise.
And then ER and some cases, they'll actually commit upfront for a certain amount of spend in a particular year.
Over a month or over a multiyear period and and that's driven by either.
New workloads that they're building and they want to just run in the cloud because of a particular use case reasons or they're migrating say.
A community workload in the on premise to the cloud because.
The cost benefit of Atlas is that much more compelling and so we're seeing a lot of intra interest from very very large organizations. I think previously you've talked about you know banks insurance companies you know.
Tech companies and so on so forth all very very interested in Atlas and we're really really excited about the interest level and and one of the other things that really surfaces in our discussions of these large enterprises is our ability to run Atlas on multiple clouds, so either they want to leverage specific expertise.
Our services capabilities with a particular cloud provider or they want to make sure that they have a diversity of workloads across different cloud providers and so running that on Atlas preserves their optionality because they can do that very easily without him to rewrite the application.
Thank you and maybe a follow up from Michael I appreciate all the color around the moving parts with Q3 guidance, including the multiyear deal that closed.
Here in Q2, instead of Q3, maybe as we just think about the rest of the year. It does obviously you look like you're guiding Q3.
To have revenue decelerated quite a bit from Q2, which makes sense given the tough comp, but as we think about Q4 s is there any thing we should be thinking about in terms of a tough compare.
For multi year deals or just anything.
To call out because the guidance does look like the diesel is.
Kind of continue continuing into Q4. Thank you.
Yeah sure Yeah. So we had we had flagged this at the very beginning of the year that in the back half both Q3, and Q4 had tough compare so youre exactly correct.
The Q3 compare was particularly driven by some multiyear deals, which we talked about but the Q4 compare.
Was also very challenging Q4 of fiscal 19 was an exceptionally good quarter.
So it's.
It's not.
Appropriate to guide her to replicating that we also called out at that time, just to remind everyone that there had been.
Some customers on Atlas that we're consuming in excess of their run rate.
We don't have enough data enough history on Atlas to know if thats kind of truly seasonal behavior and so we're not counting on that either but I think fundamentally Q2 was very strong. We're obviously raising our guidance more than the beaten it really reflects the underlying health of the business and then the last thing that we've talked about.
Consistently for the last couple of quarters, but just want to underscore is Q4 is the first time, we hit the M lab anniversary.
And while that business is performing well relative to our investment thesis the underlying cohorts are declining.
And so that obviously creates sort of a year over year headwind when you look at sort of the growth comparison.
Thank you.
Okay, and just as a reminder, ladies and gentlemen star one if you do have any questions.
Next I'll move onto Jason Ader with William Blair.
Yes. Thank you hi, guys I just wanted to.
To address the competitive landscape if you would.
Specifically relative to Amazon and any feedback you're hearing from customers on document TV and then maybe any other comments on.
Win rates against you know legacy guys and what you're seeing or just broadly speaking competitively.
We feel really good about the business I mean, obviously you know Amazon has a large reach but I think as we use it spent time on previous calls.
They've tried to emulate mongodb using a very different architecture. So that has severe consequences in terms of both features as well as performance and we've heard many situations where customers have tried to.
Used document TV and it has really been.
Right for their.
Use case, and so we don't see any headwinds in terms of competition. There is a big market. There's lots of people out there, but we feel really good about a competitive differentiation as evidenced by growth rates as evidenced by.
Some of the most sophisticated customers the world are choosing mongodb. Some for some very very mission critical workloads and they don't have a lack of access to options and.
And then.
And we feel really good about our positioning.
Okay, Great and then a quick follow up from Michael just talked about the.
The enterprise.
Vance deals that you had in the quarter.
Certainly as Weve.
So I'm assuming these are worth larger companies do you have any metric that.
You track in terms of how much of your business is let's say with global 2000 customers or something to that effect.
That's not something that we have that we sort of publicly report on I'm trying to think of as anything that we have that would be useful that that we've disclosed but.
Brian idea do you have a rough idea of how much of your business is let's call it enterprise versus more mid market.
Certainly.
If you if you separate the business into the sales sold side and the self serve side within the sales sold side you know the.
Majority is coming from larger enterprises.
The mid market team is newer and weve been scaling that more recently the product market fit within Atlas is particularly strong.
On that team and that's actually the area that my comments earlier about sort of ease of adoption.
Less comfortable making annual payments advance it's much more the mid market that we see that and so thats been growing but the majority is on the large enterprise side within dealt with and vessel.
Thank you.
Okay and moving on we have.
Pat Walravens from JMP Securities.
Hi, This is Joey on for Pat. Thank you for taking my question Oh, we were wondering about the difference between selling more databases into an existing customer compared to selling apps and how how specifically does that manifest itself in a net dollar expansion rate.
Thank you.
Well.
I'm not sure I completely understood. The the details your question, but let me try and take a stab at answering it. So unlike an half say like a workday or sales force you know if you add more employees or more salespeople.
The cost of sale is quite low because you know the customer just say, hey, I need to X number of new seats or licenses for these additional people that I've hired whereas for database software.
While we have some applications I grow very quickly organically most of the growth in an account is by adding new workloads are new apps and so.
There may be a different team a different decision maker and so on so forth involved in those decisions obviously as the more momentum we have an account the easier. The next workload becomes but that that tends to be a different buying cycle than just someone adding seats or licenses for expanding an existing application.
And so.
The benefit as that were never locked out of account does not like us like Sep versus workday, where someone's made a big commitment to Sep the workday sales person says.
What I'm not going to be able to sell anything to discuss over the next three years. That's so that this is not a winner take all market.
And in terms of our net expansion rate or next venture. It's a really strong because once we get into an account I think we've talked at the IPO and in every quarter, we have a land and expand business and so.
Once you get into an account database offers very sticky and they have they see value that they typically find other reasons to use our software for other use cases, but as I said the buying motion is a little different.
I think the other thing just to sort of get to the last part of the question is because the market is so large the expand portion sort of goes on longer and so thats very additive to.
The net air expansion rates and so if you think about.
Very simplistically, we talked about this in the context of the IPO. The Fortune 100, which obviously were addressing a much larger universe than that.
But just illustratively. It's helpful to understand we had just over half of the fortune 100 us customers. So the best we can do in terms of raw customer count is sort of not quite double within that universe of customers and Directionally we had.
Less than 1% of their spend right. So the upside on the expand part was quite significant given what a small wallet share we have relative to the very large tam.
So over that puts it somewhat in context.
Yes, that's really helpful. Thank you so much and congrats on the quarter.
Thank you.
Okay.
And next we have Jack Andrews with Needham.
Hi, gentlemen, its condo in for Josh. This afternoon. Thanks for taking my question I'll go TV World you mentioned that some customers could see an increase in cluster size due to full text search can you provide an update on any changes you're seeing in cluster size. Due to this feature was the pendulum central Tam of existing customers that may end up using full text search.
Yeah, I I should remind you that we're still in in in a beta rollout. So the the product is not tackling GA, but we have a number of customers who are now using oh testing are trialing.
Full text search and the feedback has been quite positive I think it's a little early to start giving you some sense of like a you know what the incremental growth is of each customer it really depends on the application.
And in terms of the athletes could actually applicability of a full text search in our market is very high. So you know if you think about it what application today doesn't have some embedded search functionality in it. So so we think the cross sell opportunities are quite large.
Thanks, that's helpful and how should we think about today like feature and the displacement opportunity for like a cloud based dedupe system.
And where some of the benefits of using your outlets due to like versus other systems.
Right. So I would say the the we think that the Atlas data Lake is Oh awesome solution for people, who are contemplating using hadoop technologies, because as I mentioned in the prepared remarks, there's not a huge upfront investment required there is not a need to hire some specialized skills and the time to value is not very long. In fact, you can get up and running very very quickly because you can just very easily query and parse the data that youve stored and S. Three and so we think the opportunity there is.
And incredibly.
Hi, and I think the advantage also is that if you already have existing mongodb skills. There is not a new technology that you have to learn so it becomes very easy for developers and others to basically query data using a semantic language that they are very comfortable in using and so in terms of competitive offerings.
We feel like we think about the most common data format today for modern data as Jason who better to really query and managed Jason data the Mongodb, which is.
And the architecture is built around supporting Jason and so we think we're very well positioned to go after this market given our expertise in managing modern data.
Great. Thank you.
And next we have Brent Bracelin with Keybanc capital markets.
Hi, This is Clark on for Brent I'm, just going to the comments about the midmarket customers that her really building their business around longer TV. You know is there any kind of.
Description you could kind of qualify what those customers look like are they their digital first or they are conducting their business primarily through an E. Commerce channel just some sort of way to understand what would what that kind of business in the <unk>, what those customers look like today.
Yeah sure I mean, they clearly digital first companies. There you know potentially a startup has grown into a kind of a mid market stay but growing very very quickly a they're very technology savvy, there and that business is very technology intensive.
It could be e-commerce , it could be gaming it could be a you know.
New business models, and they basically you know potentially in the machine learning and the AI space. So those companies.
So if their business is really taking off they can you know their their needs in terms of support and and and service tend to look much like a potentially large enterprise just given the the sophistication and complexity of their environment and so the advantage we have is that.
We just haven't built a mid market channel. We've built also high end enterprise channel and so depending on on that customer's needs. We can mix and match the right channel for the right customer and that gives us real flexibility in terms of how to service these very sophisticated customers.
Great and are you seeing them or would you anticipate those to be probably target customers for these add on offering for parsing on the J con data because they might have more of their core operations within mongodb.
Just trying to understand whether.
You are seeing early signs of they're not going to another vendor for analytical or sort of operational.
Understanding of their business, they're keeping it all within the ecosystem and that's it for me. Thank you yeah definitely great candidates and some of them may have already implemented some third party solution, but there's still great candidates for us to talk to these customers always tend to be evaluating different options and so but its again quite early for our data Lake product and our full text search product is still in beta, but we're very very pleased with the kind of the enthusiastic response, we are seeing.
Okay and moving onto the next question I suppose from Oppenheimer, we have been node.
Just for novice raghavan.
Hi, how are you guys have two questions first I wanted to dig into the expansion rate dynamics a bit how does your expansion rate moved up or down.
You really sequentially.
Yeah. So it's it's consistently been I think is now 18 quarters that we've said that it's over 120% a quarter to quarter. You know, there's some quarters, where you see more you know new logo activity relative to expansion from existing customers and other quarters, where you see it slightly tip. The other way, but I would say, we've very consistently had both strong new logo growth and expansion of existing customers.
Okay, and just one more on you.
Many customers are above 1 million and they are now.
So we haven't given that number sense see we give that number typically annually I think when we ended Q4 of last year that was at 39 million.
I'm, sorry, 39 customers over a million excuse me 39 customers over a million, but that's that's not a number we update quarterly.
Got it alright, congrats on the quarter.
Thank you thanks.
All right, ladies and gentlemen does appear that that does conclude our question and answer session of the call.
I'd like to turn the floor back to CEO , David Curia for additional or closing remarks.
Well. Thank you again for joining our second quarter earnings call. We really appreciate the the interest and the support and as I mentioned the upfront. We're really pleased about the quarter and we feel like we have a we are well positioned to go after a big opportunity. Thank you.
Once again, ladies and gentlemen that concludes our call for today. Thank you for joining US you may now disconnect.