MongoDB, Inc.

and welcome to the MongoDB fourth quarter fiscal year 2021 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one. Please note that this event is being recorded. I would now like to turn the conference over to Brian Denue from ICR. Please go ahead, sir.

Great. Thank you, Colt. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter and full year fiscal 2021 financial results, which we announced in our press release issued after the close of the market today. Joining me on the call today are Dave Idicharia, President and CEO of MongoDB, and Michael Gordon, MongoDB's COO and CFO. During this call, we will make four looking statements, including statements related to our market and future growth opportunities, the benefits of our product platform, our competitive landscape, our financial guidance, our planned investments, and anticipated impact of the COVID-19 pandemic on our business and results of operations, as well as on our clients and the macroeconomic environment. These statements are subject to a variety of risks and uncertainties that cause actual results to differ materially from our expectations. For discussion of the material risks and uncertainties that could affect our actual results, Please refer to the risks described in our SEC filings, including our most recent quarterly report on Form 10-Q. Any forward-looking statements made on this call reflect our views only as of today, and we undertake no obligation to update them. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release of the investor relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Dave.

Thank you, Brian, and thank you to everyone for joining us today. I will start by reviewing our fourth quarter results before giving you a company update. Looking quickly at our fourth quarter financial results, we generated revenue of $171 million, a 38% year-over-year increase, and above the high end of our guidance. We grew subscription revenue 39% year-over-year. Atlas revenue grew 66% year-over-year and now represents 49% of revenue. And we had another strong quarter of customer growth, ending the quarter with over 24,800 customers. I believe we will look back at 2020 as the year that put an exclamation point on the need for businesses to reinvent themselves using software and data. As the world increasingly becomes digital first, there's no off-the-shelf software that organizations can buy to differentiate themselves against their competition. To be blunt, you cannot buy a competitive advantage. You have to build it yourself. And to build your differentiated future using software and data, you have to maximize the productivity of your developers. Managing data is a developer's most challenging problem and the biggest drain on their productivity. Legacy platforms are not designed for how developers think and code, nor are they designed for performance and scale. This problem only gets worse as the data intensity and performance requirements of modern applications increase. Consequently, developers spend an inordinate amount of time working around the limitations of existing solutions versus spending time building better applications and user experiences that drive a competitive advantage. Moving to the cloud held out the promise of reduced complexity and improved productivity. What many early cloud adopters have learned the hard way is that moving to the cloud often exacerbates the poor state of their data infrastructure. First, companies decided to lift and shift their existing on-prem relational workloads to the cloud, replicating their on-premise problems in the cloud. As a senior IT executive in one of the world's largest asset management firms recently told us, he doesn't know of a single one of his peers who didn't come to regret the lift and shift strategy. Second, given the known limitations of relational databases, cloud providers promoted a number of other single-purpose databases to address more diverse requirements, which in turn created a larger number of data stores for customers to learn, manage, and integrate. This dramatically increased the complexity of their data architecture. Third, Cloud providers encourage customers to go all in with their proprietary offerings across the IT stack. The overwhelming number of proprietary point solutions not only slows developers down, but also deepens cloud vendor lock-in. Given the failings of existing approaches, developers and enterprises are clamoring for a modern application data platform that accelerates innovation. To be effective, a modern platform must support a broad range of use cases, meet stringent requirements for resiliency, security, and scalability, and provide enterprises the flexibility to run applications wherever they want. Our FY21 results indicate that MongoDB has clearly established itself as the world's preeminent application data platform for building the applications of today and tomorrow. We are becoming a more strategic partner to customers as they increase their sense of urgency to modernize their IT stacks. In a number of our largest accounts, we've become an enterprise standard, which indicates our strategic importance and positions us to win more workloads. The journey from the first win to becoming a standard can take a number of years as we build trust with and support from a variety of different constituents within the enterprise, including the C-suite. While each customer story has its unique elements, we have observed that they tend to follow a similar path on the way to declaring MongoDB a standard. We usually land an account by identifying a specific pain point that cannot be addressed by existing technologies. In a Fortune 50 financial institution that is now a seven-figure customer, Our early use cases leveraged the strength of the Docker model to efficiently capture complex loan applications with hundreds of entries. In the case of a global gaming leader, developers first started using MongoDB for microservices that leveraged the rapid scalability of our technology. After establishing a presence with a customer, we leveraged the success of the initial workloads to expand across divisional and geographic boundaries within the account. A top 10 US bank experienced a major data center outage a couple of years ago, and MongoDB outperformed all other databases in terms of performance and availability. At the time, our team seized on the performance of our platform to more broadly serve our customers' needs, organizing teachings and hackathons with other app development teams across the company. Two years later, that bank's customer's website experience runs on MongoDB, and with other use cases, the bank is now an annual eight-figure customer. Depending on the size of the account, the expansion phase can last many years. This is where we currently are with many of our customers today, and it is the key driver of our consistently strong net expansion rates. Once we become widely deployed, we leverage our existing internal proof points to pursue becoming a standard for future app development. Here we emphasize the versatility of the document model to address a wide variety of use cases, meaningfully simplifying their data architecture. Second, we illustrate the performance, security, and scalability of our platform, ensuring that MongoDB can be trusted for the most demanding requirements. And third, apps built on MongoDB can run on-premise, on any cloud, or across different cloud providers, which offers real platform independence, benefits no other alternative can provide. A CTO from a Fortune 100 business almost fell off his chair when we demonstrated how easily a customer can deploy a workload across two different cloud providers. He remarked he was planning to have a 50-person team work on this, and now one person can do this in a few hours. Platform independence is something the C-suite in particular cares a lot about. This strategy is working. We finished FY21 with close to 1,000 customers spending over $100,000 a year on our platform and close to 100 customers who are spending in excess of $1 million a year with us, an almost 60% increase from a year ago. As excited as we are about these stats, we are only at the beginning stages of becoming an enterprise standard. Even within our largest customers, MongoDB typically represents a small fraction of their total database spend, affording us the opportunity to meaningfully grow even in our biggest accounts. We also expanded our global reach through a new partnership with Tencent Cloud that allows customers to easily adopt and use MongoDB as a service across Tencent's global cloud infrastructure. With this partnership, the two largest cloud providers in China now provide authorized MongoDB managed service offerings, demonstrating both the popularity of MongoDB in one of the largest markets in the world and the strength of our intellectual property. Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the fourth quarter. Axiom, part of the interpublic group of companies, is a customer intelligence company that provides data-driven solutions to enable the world's best marketers to understand the customer's create better experiences, and fuel business growth. As part of its ongoing innovation in the area of real-time decision and capabilities, Axiom chose MongoDB Atlas, Data Lake, Realm, and now Charts to be a key part of its cutting-edge cloud architecture. Axiom has now reduced its time to deploy solution for new customers from two months to less than 20 minutes. 1199 Funds is one of the largest labor management funds in the United States, providing comprehensive health and retirement benefits to more than 450,000 healthcare industry workers and family members. In response to COVID-19, the company accelerated a massive cloud transformation initiative. After migrating from SQL Server to MongoDB Atlas on Google Cloud, it was able to modernize its enterprise data warehouse and leverage MongoDB Realm to deliver a COVID-19 health screening app, which captured health questionnaires from nearly 3,000 employees a day. From the start of the project to the go-live date, the complete solution was deployed in just three weeks. Cox Automotive has 40,000 auto dealers across five continents aspiring to bridge the gap between consumers, manufacturers, dealers, and lenders at every stage of the automotive experience. In response to COVID-19, the company's mobile car care division, Ride Clean, developed a mobile platform enabling drivers to schedule, and technicians to manage and perform onsite disinfection services with PureProtect. RideClean turned to MongoDB Realm Sync for zero latency data retrieval, offline application functionality, and bidirectional syncing of data between the Realm mobile database and MongoDB Atlas. The largest department of the UK government, the Department for Works and Pensions, distributes welfare, pensions, and child support to UK citizens. Its reformed welfare program, Universal Credit, faced an unprecedented test when COVID-19 caused claims to skyrocket by 10x. DWP Digital chose MongoDB to underpin its secure platform and scale its services across the distributed microservices architecture to support the huge increase in demand. PicPay, Brazil's largest e-wallet, has over 40 million users and is accepted at over 3 million stores throughout the country. After experiencing 126% growth in 2020, the company chose MongoDB Atlas because it needed a highly scalable cloud database with real-time performance and low TCO in order to achieve its ambitious growth goals. Enterprise security features like data encryption at rest, in transit, and data locality made it easy for PicPay to comply with GDPR and FSI regulations and continued to provide a best-in-class customer experience to its growing user base. Today, more than one in ten new apartments in the United States are built using Latch IoT products. Latch delivers a full building enterprise SaaS platform that helps owners, residents, and third parties experience the modern building through services like smart access, smart home, and sensor controls and connectivity. Latch chose MongoDB Atlas for its enhanced security features and the ability to move to a microservices architecture so the company could scale quickly and protect its customers' data. In summary, we had an exceptional year amidst unprecedented disruption and uncertainty. As I think back to our earnings call a year ago at the outset of COVID-19, I can't help but marvel at how we exceeded our own expectations despite the pandemic being longer and more severe than we could have mentioned at the time. I'm incredibly proud of how our team executed given the unforeseen challenges. The past year reaffirmed our conviction that we are attacking an enormous market where secular winds are increasingly at our back. We have a highly differentiated value proposition and our team knows how to execute and deliver results. In FY22, our goals remain unchanged as we singularly focus on the opportunity ahead of us. We will continue innovating to ensure that our application data platform remains the best way to build the applications of today and tomorrow. We will expand and evolve our go-to-market strategy to drive frictionless adoption of our platform no matter how or where our customers choose to consume MongoDB. And we will remain focused on our people, processes, and culture to ensure that we scale to fulfill our potential. Simply put, we're committed to innovating and investing to make the most of our opportunity and maximize our long-term value. With that, I'll turn it over to Michael. Thanks, Dave. As mentioned, we delivered another strong performance in the fourth quarter, both financially and operationally. I'll begin with a detailed review of our fourth quarter results and then finish with our outlook for the first quarter and full fiscal year 2022. First, I'll start with our fourth quarter results. Total revenue in the quarter was $171 million, up 38% year-over-year. Subscription revenue was $163.9 million, up 39% year-over-year. And professional services revenue was $7.1 million, up 24% year-over-year. As Dave mentioned, we're very proud of our execution in this difficult and uncertain environment. In particular, we had another stronger than expected quarter in terms of closing new business. Enterprises cannot afford to delay or slow down innovation, and for that reason, customers continue to increase their investment in our application data platform. That said, despite our strong go-to-market execution, COVID-19 continues to have an impact on our quarterly performance. Overall, Atlas's strong performance continues to be the largest contributor to our growth. Atlas grew 66% in the quarter compared to the previous year and now represents 49% of total revenue. compared to 41% in the fourth quarter fiscal 2020, and 47% last quarter. During the fourth quarter, we grew our customer base by over 2,200 customers sequentially, bringing our total customer count to over 24,800, which is up from over 17,000 in the year-ago period. Of our total customer count, over 3,000 are direct sales customers, which compares to over 2,000 in the year-ago period. As a reminder, Our direct customer account growth is driven by customers who are net new to our platform, as well as self-service customers with whom we now have established a direct sales relationship. The growth in our total customer account is being driven in large part by Atlas, which had over 23,300 customers at the end of the quarter, compared to over 15,400 in the year-ago period. It is important to keep in mind that the growth in our Atlas customer account reflects new customers to MongoDB, in addition to existing Enterprise Advanced customers adding incremental Atlas workloads. We had another quarter with our net AR expansion rate above 120%. We ended the quarter with 975 customers with at least $100,000 in ARR and annualized MRR, which is up from 751 in the year-ago period. We ended the year with 98 customers with at least $1 million in ARR and annualized MRR, which is up from 62 in the year-ago period. As Dave highlighted, the continued strong growth in customers with $1 million or more in ARR is a clear indication that we are increasingly becoming a strategic partner and a database standard for our customers. Moving down the P&L, I'll be discussing our results on a non-GAAP basis unless otherwise noted. Gross profit in the fourth quarter was $123.3 million, representing a gross margin of 72 percent, which is consistent with our last quarter and down from 74 percent in the year-ago period. Overall, we are pleased with our gross margin performance, which is negatively impacted by Atlas becoming a bigger portion of our revenue. As you know, Atlas has lower gross margins than Enterprise Advance because of its infrastructure component. This downward pressure has been partially offset by the greater efficiency and scale that we've been able to generate as Atlas grows. We continue to expect that we'll see some modest reduction in overall company gross margin as Atlas continues to grow as a percentage of our revenues. Our operating loss was $16 million, or a negative 9% operating margin for the fourth quarter, compared to a negative 10% margin the year-ago period. Our outperformance versus our operating loss guidance was driven primarily by our revenue outperformance. Net loss in the fourth quarter was $19.9 million, or $0.33 per share, based on 60.5 million weighted average shares outstanding. This compares to a loss of $0.25 per share on 56.9 million weighted average shares outstanding in the year-ago period. Turning to the balance sheet and cash flow, we ended the quarter with $958.3 million in cash, cash equivalents, short-term investments, and restricted cash. Operating cash flow in the fourth quarter was negative $18.6 million, After taking into consideration approximately $2 million in capital expenditures and principal repayments of finance lease liabilities, free cash flow is negative $20.7 million in the quarter. This compares to negative free cash flow of $10.9 million in the fourth quarter of fiscal 2020. I'd now like to turn to our outlook for the first quarter and full fiscal year 2020. For the first quarter, we expect revenue to be in the range of $167 million to $170 million. We expect non-GAAP loss from operations to be $21 to $19 million, and non-GAAP net loss per share to be in the range of $0.39 to $0.36, based on 61.2 million weighted average shares outstanding. For the full fiscal year 2022, we expect revenue to be in the range of $745 million to $765 million. For the full fiscal year 2022, we expect non-GAAP loss from operations to be $84 to $74 million, and non-GAAP net loss per share to be in the range of $1.55 to $1.39 per share, based on 62.1 million weighted average shares outstanding. Let me provide some context behind our revenue outlook. Our expectation that the COVID-19 impact will continue to impact our new business activity in the near term, but that the business conditions will slowly improve as the year goes on, and as global vaccination efforts positively impact the macroeconomic environment. More specifically for Q1, we expect to see a slight sequential revenue decline as Q1 is typically a lower new business quarter than Q4. As a reminder, revenue recognition under ASC 606 for our enterprise advanced product disproportionately affects in-quarter performance due to the upfront term license. Let me now turn to our investment framework for fiscal 22. As Dave mentioned, we are pleased both by our strong execution and the market's receptivity to our platform. We therefore continue to believe that the right posture is to invest for the long term to pursue our market opportunity. In fiscal 22, we will continue funding high priority areas across the organization. First, we'll continue with robust R&D investments to further advance the breadth and depth of our application data platform. Second, we will continue growing our sales capacity globally. We remain fractionally penetrated relative to the size of our opportunity. Given another year of strong productivity, we believe that the primary constraint of our productive capacity growth is how quickly we can effectively scale our operations. Third, we will continue investing as appropriate to ensure that we are efficiently scaling our organization, systems, and processes as we pursue our long-term opportunity. Finally, it is worth noting that our COVID-19 outlook has implications for our OPEX as well as our revenues. As life slowly normalizes throughout fiscal 22, we expect to incur incremental expenses, most notably related to our offices, travel, and in-person events. Our current expectation is that we will incur approximately $20 to $25 million of incremental expense in this area compared to fiscal 21, with most of that impact occurring in the second half of the year. To summarize, MongoDB delivered excellent fourth quarter results and full fiscal 21 results, despite operating in an unprecedented environment. Our focus on executing against our product roadmap and expanding our go-to-market reach is driving high levels of growth at scale, and we are seeing attractive returns on those investments. The success that we are having establishing ourselves as the world's preeminent application data platform positions us for continued long-term success. With that, we'd like to open up to questions.