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spk10: Good day and welcome to the MongoDB second quarter fiscal year 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 star then one on your touchtone phone. And to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. Please know this event is being recorded. I would now like to turn the conference over to Brian Dinew from ICR. Please go ahead, sir.
spk01: Great. Thank you, Chuck. Good afternoon, and thank you for joining us today to review MongoDB's second quarter fiscal 2022 financial results, which we announced in our press release issued after the close of market today. Joining me on the call today are Dave Edicheria, 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, customer behaviors, our financial guidance, and our planned investments. These statements are subject to a variety of risks and uncertainties, including those related to the ongoing COVID-19 pandemic and its impacts on our business, results of operations, clients, and the macroeconomic environment that cause actual results to differ materially from our expectations. For discussion of 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 on our earnings release on the investor relations portion of our website, for reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Dave.
spk12: Thank you, Brian, and thank you to everyone for joining us today. I will start by reviewing our second quarter results before giving you a company update. Before diving in, I want to share that today marks my seventh anniversary at MongoDB. I'm incredibly proud of how much progress we've made over the past seven years. We went from being a small private company with an interesting technology to disrupting one of the largest markets in all of software. Along the way, we changed how open source software is licensed, we introduced a new cloud service that required us to both partner and compete with the largest cloud providers, and we grew revenues 20-fold with a compound annual growth rate of over 50%. I'm incredibly grateful to all the amazing people at MongoDB and to our customers and partners around the world who made this happen. As proud as I am of the amazing journey we've had, I'm even more optimistic today about our opportunities ahead. Looking quickly at our second quarter financial results, we generated revenue of $199 million, a 44% year-over-year increase and above the high end of our guidance. We grew subscription revenue 44% year-over-year. Atlas revenue grew 83% year-over-year and now represents 56% of our revenue. And we had another strong quarter of customer growth, ending the quarter with over 29,000 customers. Businesses across nearly every industry have realized that in today's highly dynamic global markets, speed of development is a meaningful competitive advantage. Businesses that can develop software faster are able to improve their products faster and ultimately grow more quickly than the competition. We believe our strong second quarter results are a clear indication that customers view MongoDB as a critical platform to accelerate their digital innovation agenda. Customers of all types are choosing MongoDB because they can develop so much faster using our platform to build new applications and re-platform legacy applications across a broad range of use cases to drive their business forward. Fundamentally, MongoDB's application data platform offers three intrinsic advantages. First, MongoDB's document model is designed around how developers think in code, unlike legacy data technologies. This enables developers to be far more productive and build applications faster as compared to any other technology. Second, MongoDB's document model is a superset of other data models. Tabular, key value, time series, graph, and other kinds of data relationships can be easily created using documents. The document model enables MongoDB to address a wide range of use cases and reduces the need for customers to use niche technologies that only serve a single purpose. Third, MongoDB is designed for performance and scale. With MongoDB's sophisticated capabilities to replicate, manage, and distribute data at massive scale, organizations increasingly choose MongoDB to address the most demanding requirements. Legacy technologies are fundamentally not designed for today's scale and performance expectations, requiring developers to spend an enormous amount of time working around their architectural limitations. The continued success of Atlas shows that speed is of paramount importance to our customers. Atlas is the best way for customers to enjoy the benefits of our platform as the time to value can literally be only a matter of minutes. Atlas had another excellent quarter, accelerating to 83% year-over-year growth while approaching a half a billion dollar run rate. We also had another strong quarter of Atlas customer additions from self-serve to enterprise customers. Our second quarter results give us even more conviction to continue investing in both our product portfolio and our go-to-market initiatives. Starting with go-to-market, our field sales team is increasingly being pulled into higher-level strategic conversations at the C-suite of the largest companies in the world, and we are adjusting our approach to more effectively serve that audience. Last year, we experimented with increasing our focus on our most promising customers. Our hypothesis was that by going deep into an account with more resources, it would position us more strategically and allow us to penetrate the account more quickly. Those investments produced excellent returns and most accounts that ran this experiment grew faster than we expected. This is giving us confidence to expand this deeper coverage model to more accounts this year, while also focusing on expanding our field sales capacity in all regions. Our inside sales team is firing on all cylinders and had another great quarter. The strong product market fit of Atlas for this channel, along with the changes we introduced last year to make it easier for customers to start using Atlas, have had a positive impact. Given the results, We are focused on expanding our inside sales capacity in our regional hubs around the world to capture more of the large opportunity we see in this channel. Finally, turning to self-serve, this channel is a cost-effective way to acquire a large number of customers and is a critical lead generation vehicle for our sales organization. We are focused on increasing our sophistication on digital acquisition and product-led growth techniques to increase the top-of-funnel and optimize mid-funnel conversion rates. This is an iterative process with a lot of experimentation that is yielding promising results. Turning to our product roadmap, we continue to invest both to extend our lead in the core database space, as well as to mature and grow our emerging products. At MongoDB.live, our user conference held in July, we made several significant product announcements that further advanced our vision. We focused on two themes, ease of use and expanding the capabilities of our platform to make it more compelling for customers to standardize on MongoDB. First, on ease of use, making it easy for developers to use and get value out of MongoDB has been the core of our DNA since the founding of the company. Our announcement on Atlas Serverless takes ease of use and developer productivity to the next level. With Serverless, customers can get started with MongoDB without having to pick a specific machine type or size. The application connects to Atlas, and we handle the elastic scaling of compute and storage seamlessly, whether an application scales quickly or has spiky traffic patterns. This dramatically simplifies life for our customers because they no longer have to do capacity planning or manually intervene to adjust the size of their deployment. We expect Surrealist to drive more customer demand because getting started on and using Atlas just became even easier. Next, for customers who want to benefit from our sharding features to manage a massive amount of data, we introduce live resharding. As a reminder, sharding is a method for horizontally distributing data across multiple machines. MongoDB uses sharding to support deployments with very large amounts of data and high throughput operations to prevent any single machine from becoming a bottleneck. Previously, when a customer wanted to shard data, the customer had to pick a shard key, essentially the parameter that would be used to partition the data. However, we know an application's requirements can change quickly, make it more beneficial to partition data using a different shard key. Live resharding allows users to easily change the shard key when this happens. This feature, which is not available on any other platform, will make it far easier for customers to start using our sharding capabilities and seamlessly redistribute data when the requirements of their application or their business change. Finally, our announcement and version API addresses a structural issue with all databases. Historically, when a new database version is introduced, there are feature changes that can break existing application functionality and create significant rework for development teams. Invariably, Some organizations prefer to stay on an older version of a database to avoid this risk, but the downside is that they then cannot take advantage of new features available in the latest version. Our introduction of Version API solves this problem. The Version API feature lets you upgrade your MongoDB server at will. This groundbreaking capability allows customers to decouple the application development lifecycle from the database lifecycle, so they only need to update their application when they want to introduce new functionality not when they upgrade the database. Of all the features we announced at MongoDB.live, version API got perhaps the most enthusiastic customer reception. Regarding the second theme, we remain focused on expanding the capabilities of our platform because customers consistently tell us that they want a modern general purpose platform that precludes the need for single purpose technologies in order to reduce backend infrastructure complexity and increase the speed of innovation. We introduced native time series support across our entire platform. Time series collections, clustered indexing, and Windows functions make it easier, faster, and lower cost to build and run applications like IoT. While we were able to address this fast-growing use case in the past, with these new features, we can compete for even the most demanding time series workloads. We also added depth of functionality across our emerging products, perhaps most notably in Atlas Search. We're enhancing search with custom synonyms and function scoring, which will allow e-commerce customers to provide more relevant and geographically targeted results. We believe these features will make Atlas Search an excellent solution for even more use cases. Finally, we also recently announced that we achieved FedRAMP-ready status. This designation allows us to capture the substantial demand for MongoDB Atlas across federal and state government agencies and ISVs that serve that market. Our recently announced product enhancements enable customers to use MongoDB for an even broader set of use cases and represent a meaningful step forward on our journey to deliver the preeminent modern application data platform. Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the second quarter. JetBlue is New York's hometown airline with over 100 destinations across the US, Caribbean, Latin America, and between New York and London. To overhaul their core e-commerce app, JetBlue chose the MongoDB Application Data Platform. MongoDB's flexible data model allows JetBlue to build dynamic customer experiences within their ticketing application as well as predictive analytics in real time. DataRobot is a leader in augmented intelligence, delivering a trusted AI platform that empowers organizations to make better data-driven business decisions faster and at scale. MongoDB has powered the company's SaaS platform from its inception and this quarter, DataRobot migrated from MongoDB Community Edition to Enterprise Advance for compliance, encryption features, and support. Our enhanced relationship will help DataRobot continue to innovate and support its global customer base as users are using AI to transform their businesses. Roma Capitale is the governing body for the city of Rome and manages services across transport, welfare, and education for over 4 million citizens. In a bid to drive a new smart city approach, ROMA chose MongoDB as part of the underlying data platform to modernize its entire content management system and drive a new comprehensive single view environment for development. As a result, ROMA jumped from 15th place to fourth in the latest Italian Smart City ranking and was able to bring new online digital opportunities to its citizens. PT Vision Net Intational, or OVO, a leading Indonesian payments, rewards, and financial services platform relies on MongoDB to power its core digital payments platform, which serves over 115 million devices. As part of a strategic initiative to market all of its database workloads spread across multiple databases and hosting platforms, OVO chose MongoDB Atlas Enterprise to consolidate its tech stack and move to Google Cloud. OVO expects the monetization will increase developer productivity, accelerate new feature release cycles, and consolidate workloads, making the OVO infrastructure future-ready. In summary, we had another excellent quarter. Our customers want to innovate faster and are looking for a scalable general purpose application data platform that will give their developers the freedom to move quickly. MongoDB is increasingly seen as uniquely positioned to fulfill this need. With that, I'll now turn it over to Michael.
spk13: Thanks, Dave. As mentioned, we delivered another strong performance in the second quarter, both financially and operationally. 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 2022. First, I'll start with our second quarter results. Total revenue in the quarter was $198.7 million, up 44% year over year. Subscription revenue was $191.4 million, up 44% year over year. And professional services revenue was $7.4 million, up 27% year over year. We exceeded our expectations in both Atlas and Enterprise Advance, but our outperformance was particularly notable in Enterprise Advance. As you know, EA has a more immediate impact on revenue due to the fact that under ASC 606, we're required to recognize the term license component of revenue upfront. Overall, Atlas's strong performance continues to be the largest contributor to our growth. Atlas grew 83% in the quarter compared to the previous year and now represents 56% of total revenue compared to 44% in the second quarter of fiscal year 2021 and 51% last quarter. During the second quarter, We grew our customer base by over 2,200 customers sequentially, bringing our total customer count to over 29,000, which is up from over 20,200 in the year-ago period. Of our total customer count, over 3,600 are direct sales customers, which compares to over 2,500 in the year-ago period. As a reminder, our direct customer count growth is driven by customers who are net new to our platform, as well as self-service customers with whom we now have a direct sales relationship. The growth in our total customer count is being driven in large part by Atlas, which had over 27,500 customers at the end of the quarter compared to over 18,800 in the year-ago period. It is important to keep in mind that the growth in our Atlas customer count reflects new customers to MongoDB in addition to existing EA customers adding incremental Atlas workloads. We had another quarter with our net AR expansion rate above 120%. We ended the quarter with 1,126 customers with at least $100,000 in ARR and annualized MRR. which is up from 819 in the year-ago period. The continued strong growth in customers with $100,000 or more in ARR is an indication of the success of our land and expand go-to-market strategy and the fact that we are increasingly becoming a strategic partner and a database standard for our customers. Moving down the income statement, I'll be discussing our results on a non-GAAP basis unless otherwise noted. Gross profit in the second quarter was $142.9 million, representing a gross margin of 72%. which is consistent with last quarter and consistent with 72% in the year-ago period. Overall, we are pleased with our gross margin performance, which is only seeing a modest impact from Atlas as it becomes a bigger portion of our revenue despite its infrastructure component. We continue to expect that we'll see a modest reduction in overall company gross margin as Atlas continues to grow as a percentage of our revenues. Our operating loss was $11.5 million, or a negative 6% operating margin for the second quarter compared to a negative 7% margin in the year-ago period. Our outperformance versus our operating loss guidance was driven primarily by revenue outperformance. Net loss in the second quarter was $15.2 million, or 24 cents per share, based on 63.4 million weighted average shares outstanding. This compares to a loss of $12.7 million, or 22 cents per share, on 58.4 million weighted average shares outstanding in the year-ago period. Turning to the balance sheet and cash flow, after raising almost $900 million in a follow-on equity offering during the quarter, We ended the quarter with $1.8 billion in cash, cash equivalents, short-term investments, and restricted cash. Operating cash flow in the second quarter was negative $19.8 million. After taking into consideration approximately $2.9 million in capital expenditures and principal repayments of finance lease liabilities, free cash flow was negative $22.7 million in the quarter. This compares to negative free cash flow of $15 million in the second quarter of fiscal 2021. I'd now like to turn to our outlook for the third quarter and full fiscal year 2022. For the third quarter, we expect revenue to be in the range of $202 to $204 million. We expect non-GAAP loss from operations to be $25 to $23 million and non-GAAP debt loss per share to be in the range of 42 cents to 39 cents based on 66.4 million weighted average shares outstanding. For the full fiscal year 2022, we now expect revenue to be in the range of $805 million to $811 million. For the full fiscal year 2022, we now expect non-GAAP loss from operations to be $67 to $62 million, and non-GAAP net loss per share to be in the range of $1.20 to $1.13, based on 64.6 million weighted average shares outstanding. To summarize, MongoDB delivered excellent second quarter results. We're driving high levels of growth at scale, driven by our large market opportunity and strong execution. We continue investing to capture the large opportunity We're seeing attractive returns on those investments, and we're excited about our positioning for the future. With that, we'd like to open it up to questions. Operator?
spk10: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. We ask that you please limit yourself to one question and one follow-up. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Sanjit Singh with Morgan Stanley. Please go ahead.
spk11: Thank you for taking the question, and congrats on another really impressive quarter. Dave, maybe I wanted to understand the Atlas growth. I think on a sequential dollar basis, you almost doubled the amount of revenue that you added in Q1. If we could sort of unpack that along a couple of different buckets, sort of existing customers, sort of expanding with Atlas versus, you know, migrating either Enterprise Advanced or another database versus contribution from NetMuse, particularly customers you may have added in the quarter, but also maybe the customers that you have added last year, which you saw a big uptick. If we could sort of unpack the sources of growth of Atlas, I think that would be helpful.
spk12: Sure. First of all, what I would say is that customer additions remain robust across all three channels. So we're seeing strength in all geographies, including places like India and Latin America. And we frankly also see strong enterprise adoption of Atlas. Atlas is increasingly seen as the destination for mission-critical applications. And as we said last quarter, over 600 customers spend north of $100,000 on Atlas alone. And self-serve remains a critical channel and a customer acquisition vehicle. So over 50% of Atlas AR was from customers originally sourced in the self-serve channel. I'd also say that multi-cloud is a huge selling point for Atlas. Multi-cloud improves resilience, and as you know, cloud providers do have outages, and they can leverage the best features of each cloud provider and avoid lock-in. In terms of breakdown of where these customers are coming from, I think I would just say we're seeing healthy growth of both new customers as well as expansions of existing customers And yes, the customers we've acquired over the last few quarters are growing. Expansion rates for Atlas are very strong. And so all of them are essentially contributing to the growth of Atlas.
spk13: I would just add maybe, Sanjit, from perspective, the two thoughts. One, on the year-over-year piece, obviously Q2 was an easier Atlas compare given the COVID impact that we experienced last year that was that sort of broad-based but modest impact that we saw, resulting in slower expansion from accounts. And then sequentially, to your point, there is some seasonality, and Q2 tends to be meaningfully stronger than Q1, and so you see that showing up in the numbers as well.
spk11: That's great context, Michael. And then as my follow-up, Dave, MongoDB 5.0 versus 4.0, in any way sort of you could sort of frame out How significant is this release? I mean, 4.0 was a major release, right? There was a lot of key enterprise features, multi-document asset support, sort of a game-changing release, at least in my view. How should we think about 5.0 versus the 4.0 cycle?
spk12: Well, it's a question I actually haven't thought of, but as you said, 4.0 was a seminal release for us because it introduced a big feature with multi-document asset transactions, which at the time was the biggest objection for enterprises or anyone wanting to use MongoDB for a mission-critical use case. That objection was obviously taken off the table. What I would say with 5.0 is we're just continuing to double down on, one, expanding our platform, obviously with all the additions that we're making, especially with native time series support, and we're also making it far easier for customers to use MongoDB. As you can imagine, with over 29,000 customers, we have customers of all shapes and sizes, of all levels of sophistication. And we really want, frankly, and this is in our DNA, we really want the database to get out of the way of people getting their work done. And so we just want to make it really easy for people to use MongoDB and obviously Atlas is the best way to expose a lot of the features. And so I would just contrast, I would say 4.0 is all about convincing people that we truly could be a general purpose mission critical platform. And 5.0 is all about expanding that platform and making MongoDB even more easy to use so that people can get started on MongoDB more quickly.
spk11: Makes total sense, Dave. Congrats on the stellar results. Thank you.
spk10: Thanks, Sanjit. The next question will come from Raimo Linchao with Barclays. Please go ahead.
spk09: Hey, thanks, and congrats from me as well. Can you talk a little bit about, Dave, what you see out in the field in terms of customer interest to do more stuff again. So I'm looking at your self-service atlas starting to kind of re-accelerate on growth, but we're coming also out of the pandemic. What do you see in terms of pipeline build and appetite for bigger projects coming through again? And I had one follow-up from Mike.
spk12: We're clearly seeing more and more demand. So one of the things that we talked about in the prepared remarks is that we had identified a set of promising accounts and said, What can we do to grow these accounts even more quickly? Because we knew that they liked MongoDB, but our percent of their total database spend was still quite small. And so when we deployed more resources and really had one rep focus on that account only, we suddenly saw the level of focus and the incremental resources really drive great results. Those accounts started growing more quickly. And so we're starting to do that even more with some of our other more promising accounts. Again, it's a small percentage of our total customer base, but these are probably some of the most sophisticated and demanding customers. And we are obviously careful about who we choose. These people are predisposed to use Atlas, so we kind of negotiated some sort of agreement with them to use our cloud services. They already have some existing Atlas spend, so we know we have some strong champions in the account. But we also know that there's some massive upside in that account. So for the most demanding customers, we're seeing really, really strong signals. And this is giving us confidence to expand this program even further this year as well as into next year. So that's kind of at the top of the food chain. And I would say that we're even seeing digital native companies, ISVs, who have very, very demanding requirements, continue to either choose MongoDB or double down on MongoDB for their platforms, and we're really excited about what that means for us long-term.
spk09: Okay, perfect. And then the follow-up for Michael, just if I look at your cash position now, it's obviously kind of after the action last quarter, kind of a bit bigger. Can you just talk a little bit about your philosophy around cash, how much you want to carry to run the company, et cetera? Thank you.
spk13: Sure, yeah, thanks. Obviously, the cash was bolstered in part by the equity offering we did during the quarter. We talked about that as opportunistic financing. I think we just want to make sure that we have the full degrees of freedom that we think makes sense in terms of maximizing the long-term opportunity and to sort of invest in the business as long as we continue to see good returns from that. So I think that's probably the key points there.
spk09: Okay, perfect. Thank you.
spk13: Congrats.
spk10: The next question will come from Cash Rangan with Goldman Sachs. Please go ahead.
spk02: I'm sure you'll get very good returns on cash. Thank you so much, Raimo. My question was on Atlas. It looks like the adoption curve for Atlas is turning out to be even more aggressively positive than one would have expected, given that it's cloud deployment. If we can just compare and contrast the kind of workloads that Atlas is able to take on relative to its life history versus the core MongoDB platform? And what are the things that have surprised you with the adoption curve? And what does this mean for where this business could look like in the next three to four years in terms of the scale and scope of customers you could take on versus the standalone MongoDB on-prem database server? Thank you so much.
spk12: Yes, so one of the key differences with Atlas and, say, deploying on-prem is that developers can move very, very quickly without needing their operations team to set up the underlying compute and storage infrastructure to get going. And by definition, the cloud has elastic scalability, and so people can increase their instance sizes or their capacity very, very quickly without having to go back and ask the ops teams to build out more infrastructure. So the ability for development teams to move very, very fast is even more pronounced on a cloud service like Atlas than it is on-prem. The second thing I would say is that Atlas has clearly become a mission-critical platform. In the early days, there were probably people who were obviously being a new service and people didn't know what to expect. You saw more dev and test workloads, perhaps, you know, peripheral or tier three workloads moving on to Atlas. But as people got more and more experience with Atlas, as we added more enterprise features to Atlas, people became increasingly more comfortable. And now we're seeing, you know, very, very large and demanding applications move to Atlas, even from some of the more conservative mainstream organizations out there. So what we're really seeing now is enterprise adoption of Atlas at scale.
spk02: So there's no limiting factor itself as it relates to Atlas as a platform, right? We have everything that you get with MongoDB plus more, the deployment flexibility, the ability to scale, so on. Is there a point where Atlas becomes even more scalable, even more functionally replete than the core MongoDB platform?
spk12: Well, I think we said this, and this happened a couple years back. I mean, we got to feature parity on Atlas far faster than we expected. And now actually we lead new feature development on Atlas first, and then we catch up on Enterprise Advanced. And so I would say that in terms of feature completeness and scalability, Atlas is the best solution in the marketplace today. And I think you'll see us continue to invest aggressively in Atlas because every customer that we know, even the customers who are predominantly on-premise, they know that the benefit of using MongoDB is is that they can start on-prem, but they have a very seamless path to the cloud. There's no forklift upgrade. There's no rewrite of the application code. It's just a very seamless migration path. And so there's different customers based on the regulatory environment they're in, compliance reasons, sometimes even cultural reasons. They may be moving more slowly, but every customer has a very clear migration path to the cloud, and we believe the ultimate destination will be Atlas.
spk02: Congrats, Dave. Thank you so much.
spk12: Thanks, Cash.
spk10: The next question will come from Brad Reback with Stifel. Please go ahead.
spk14: Great. Thanks very much. Gentlemen, as you think about the last couple of years, you've obviously introduced a bunch of new products. So as we think of where we are today, are those products a meaningful amount or a meaningful contributor to new consumption that we've seen quarter over quarter, year over year, or is that really yet to come?
spk12: Yeah, so Brad, I think that's a good question. Again, I just want to remind you and everyone else that the new product usage, the revenue shows up as Atlas revenue. But let me just give you a little bit of color on each of the products and what we're seeing. On search, what's becoming very, very clear is that customers are really, really attracted to being able to combine a database with a search engine as one endpoint. And as a managed service, that becomes very, very attractive. They don't want a disparate MongoDB deployment, and then some sort of elastic or solar deployment. To do that on one platform becomes really attractive, and we're seeing a really interesting uptick there. On Realm Sync, which, by the way, Sync was just G8 in February, we're seeing some really interesting customer use cases, in particular in retail and logistics, where people want to do inventory management and logistics, and we're seeing some really interesting customer traction there. On the Data Lake product, we're seeing a lot of interest, especially from some of our larger customers, to basically improve the economics of keeping large volumes of data accessible. Because the challenge is that either they have to migrate the data completely, but then you can't really access it, or you have to delete the data. And with online archive, you can actually get the benefits of having all the data, but in a very cost-effective way. We also see that people are building more and more interesting, smarter applications. where they're leveraging analytics to build better customer experiences. And so as that becomes more pervasive, you'll see use cases like real-time analytics and so on and so forth becoming more and more prevalent. And then what I would say is that even though Time Series is new, we've had some interesting traction on Time Series. Again, customers are attracted to rather than buying some sort of bespoke solution, being a part of a single platform, and we can leverage the existing MongoDB install base to go after more business. And so I would say that's the color I provide in terms of new customer traction, and we're quite pleased with how things are progressing.
spk14: That's great. Thanks very much.
spk10: The next question will come from Brent Bracelin with Piper Sandler. Please go ahead.
spk14: Thank you. Good afternoon. Sticking with Atlas Thread here, obviously third quarter of accelerating growth. If I look at kind of customer ad metrics versus usage metrics, this quarter it looks like a more material uptick in usage. So I guess first question, what drove the step up in Atlas usage this quarter? I think you talked about 600, 100,000 plus kind of enterprise type customers spending on the platform. Is it mostly enterprise or are there other factors here at play? And then one quick follow-up.
spk12: Yeah, what I would say is that the performance of Atlas is strong across all the three channels, but I think I would add that the enterprise adoption of Atlas is really, in particular, something that should be called out because we're seeing customers now becoming very comfortable in deploying mission-critical applications on Atlas with very demanding requirements. And I think that's a big part of what's driving our growth. And I would also say that You know, multi-cloud is becoming increasingly important. Customers really like the fact that they can protect and preserve their investments in the application, even though they may end up moving cloud providers or maybe running an app across different cloud providers. And I would say that we're seeing some really interesting demand in some regions like India and Latin America, especially in a mid-market channel. So that gives us, you know, just gives us more conviction about how big an opportunity we're going after.
spk14: Great. And then, Michael, for you, I know... Yeah.
spk13: Let me just add on one thing and then happy to cover your question. I think people get the year-over-year piece given the easier compare, but I think that I just want to underscore the sort of sequential piece, which I think is really important in the seasonality of Q2 being stronger than Q1. And when we look out to the second half of the year, we see a tougher compare for Atlas in the second half. Sorry, go ahead.
spk14: Got it. So the Seasonal factor help there. My question is still on Atlas. It's just on the gross margin side. I know overall gross margins down tick slightly, but if I look at kind of gross subscription gross margins, you're well north of 75% for the last three quarters, even with a pretty material mix shift to Atlas. So do you think now with Atlas over half of the revenue mix that sits 75% subscription gross margin is sustainable?
spk13: Yeah, so I don't think we're prepared to call a bottom yet, but we've been exceptionally pleased with how we've executed against the strategy. There's still sort of additional opportunities, and while we're very pleased that Atlas is 56% of revenue, there still is a margin delta between the two and a healthy chunk of the revenue, and so we've got more that we need to do and want to do on Atlas gross margin, so we're certainly not at a bottom, but we've been really pleased with the progress to date.
spk11: Sounds good. Thank you.
spk10: The next question will come from Jason Adder with William Blair. Please go ahead.
spk06: Yeah, thank you. Dave, do you have a sense of how you're doing versus the cloud players? I mean, obviously your results speak for themselves, but do you track win rates there and any just color commentary on your competitive position versus some of the house databases from the cloud providers?
spk12: Well, if you know anything about the MongoDB culture, we're very focused on serving our customers, but also being quite aware of what a competition is doing, and I'm pleased to report that our win rates against the competition are very, very high. Against both the standalone companies as well as the clones being offered by the cloud providers, our win rates are really, really high. As I've said in the past, our biggest issue is deals that are going down that we're just not aware of, and those are deals that keep us up at night because When you go head-to-head, our win rates are extremely high.
spk06: All right. And then just a quick follow-up on the multi-model capabilities of the platform. I know you have native time series now. I know you have graph and some other data models. Do you have a sense of how much of your customer base actually uses some of those capabilities? Can you track that?
spk12: In general we can, and obviously with these new capabilities we can track usage. One of the benefits of a cloud service is you get much better fidelity in terms of what customers are doing on your platform. And to underscore the point you just made is that the point that we make to our customers is that rather than having a bunch of bespoke solutions, and some of our competition has like 13 or 15 different database options, you know, what people realize after the fact is that the challenge of managing, learning, managing and supporting all the different technologies, let alone dealing with how to, you know, query all that data, you know, synthesize all that data, backup all that data becomes an onerous management tax. And so being able to consolidate it on a single platform becomes very, very attractive, which is why we're seeing so much interest in search, which is why we're seeing so much interest in time series, even though it's very early. and why we think that our platform strategy is really working.
spk06: Thanks. Good luck.
spk12: Thank you.
spk10: The next question will come from Tyler Ratte with the city. Please go ahead.
spk04: Thank you. Good evening. I wanted to start, David, you made an interesting comment in your prepared remarks just around higher sea level engagement. And I guess a couple questions there. What specifically are you doing to support that? Is it hiring more experienced traditional enterprise sellers? And then secondly, what do you think is driving that? Is it Atlas? Is it just overall standardization as they look at legacy migrations? Just to expand on that comment would be helpful. Thank you.
spk12: Yeah, sure. So one of the things that we learned about the buying behavior in this space is that people make decisions workload by workload. So every time you build an application, every time you want to replatform an application, you have to make a decision about what database you want to use. So it tends to be when you're in an account, you tend to have a bunch of micro decisions about all these workloads, and you have to almost win them workload by workload. The benefit of going high is that ultimately your goal is to become declared a standard. where people don't need permission to use MongoDB to build an app. They can pretty much choose MongoDB, quote-unquote, it's a product off the shelf that they can choose, and it's part of the standard architecture that's been blessed and approved by that organization. So part of the value of going high is accelerating the path to being declared a standard. And going high also allows you to be positioned very differently than just being yet another database that a company uses. So helping them understand how we can really help them accelerate the business, how we can help them seize new opportunities and respond to new threats, and that it's a real competitive advantage to build applications among VB versus any other alternative. So in terms of the people we have, we hire some outstanding salespeople and sales leaders, and so obviously we leverage the whole organization up into and including the C-level executives. For example, Sihir Azam, our Chief Product Officer, Mark Porter, our Chief Technology Officer, and myself and others get involved in strategic conversations. Cedric Pesch, our CRO, is outstanding at knowing how to kind of build and scale these types of organizations, and we have very strong leaders in different theaters of the world who know how to do this really, really well. And I would say in terms of why are we being invited to these conversations, one, I would say, you know, People are starting to get more and more familiar with MongoDB. There's more and more evidence of the value we can provide. So one is time. They get more experience with MongoDB and they get more confident. Second, I would say our product portfolio has expanded quite significantly so that we can address more and more use cases. And third, obviously Atlas has really changed the game where people can just deploy MongoDB far more quickly than doing it serially on premise. And so all those things have kind of been a confluence of events for us to see the acceleration in these accounts.
spk04: Thanks. And Michael, a follow up for you. I think in an earlier question you referenced some more challenging compares in the second half on a sequential basis on Atlas. I'm just curious if you could expand on that. I think if we look back at least on a dollar basis added, the last few years you've seen similar, if not even a little bit more, kind of net new Atlas revenue added in Q3 than Q2. So just curious if you could expand on that and how we should kind of think about the shape of the Atlas trajectory for this year.
spk13: Yeah, so it's less about sequential and it's more commenting that the first half of the year in the base period of the compare was an easier compare given the COVID impacts that we saw at the end of Q1 and then in Q2. So it's really more of a year-over-year compare question than a sequential comment.
spk10: The next question will come from Carl Kierstad with UBS. Please go ahead.
spk16: Thank you. I've got two Atlas-related questions. Dave, a lot of developers are building apps for Azure and GCP. I think we all understand that the vast majority of Atlas revenues are on AWS. Could you give us a bit of a progress report maybe on the mix from Atlas on GCP and Atlas on Azure? Thank you.
spk12: Yeah, I don't believe we break out the exact detail, but our business tends to mirror the market share of all three cloud providers. I would say GCP probably is further ahead in terms of – at least we're further ahead with GCP relative to their market share. But in general, our business tracks along the market share of the cloud providers. I would say GCP – and I think what really differentiates one cloud provider versus another is that – people are recognizing that moving an Atlas workload to their cloud actually has ancillary benefits for that cloud provider. That customer ends up consuming other services, and the dollars that they spend, they spend multiples of that with the end cloud provider. So in particular, Amazon and Google have been more aggressive in partnering the field at the sales level. There's more partnering going on, and I think that's yielding you know, more deals. And I think Microsoft is starting to see potentially the benefits of doing that as well, but they're a little bit further behind.
spk16: Got it. That's helpful. And then maybe a second Atlas question. The Azure Cosmos DB vulnerability got a decent amount of attention over the last couple of weeks. I'm just curious whether you sense any change in focus on cloud database security exposures and how and if that's a differentiator for Atlas customers.
spk12: Yes, so that's a good question. Obviously, that news was quite recent in terms of what happened with the Cosmos breach. And just to level set, a security company discovered that it was possible to gain complete unrestricted access to accounts and databases of all the Azure customers, including their flagship product, Cosmos DB. And this vulnerability was introduced through integration through its Jupyter Notebook service. I would say that... We have a very robust focus on security. Our products have a bunch of security certifications, including SOC 2, ISO 27001, HIPAA, PSI, et cetera. And we have layers of defensive controls and triggers alarms in the event of suspicious activity. We spend a lot of time on product innovation in the area of security, including leasing features like client-side field-level encryption, which allows customers to store data in Atlas without there being anyone outside of their organization who can even see the data. We utilize external security firms to perform regular penetration tests, same way an attacker would. And we have had a coordinated disclosure program where we encourage independent security researchers to contact us if they find a security issue in our products and we reward them accordingly. So we found tremendous value and output from our engagement with the external security consultants researchers. as well as our internal team and controls around vulnerability and discovery and management. And thankfully, we have not had a breach of MongoDB Atlas, but we're very, very focused on security. It's a core tenant of our offering.
spk16: Okay. Dave, thank you for that.
spk10: The next question will come from Pat Walravens with JMP Securities. Please go ahead.
spk03: Oh, great. Thank you, and congratulations on the quarter. Hey, Dave, if you look at the five major use cases for databases, transaction processing, data warehousing, data science, stream processing, operational intelligence, where do you see the most opportunity for MongoDB?
spk12: Well, clearly, our roots start off in transaction processing, but we definitely see a lot of opportunity in what you call operational intelligence or what we say is analytics or real-time analytics for the application. We're not trying to be a data warehouse. And you'll see us continue to invest more in that area. And what we see is that it's a massive market, and we're well-positioned. And as we continue to expand our platform, we address a wider variety of use cases. And what I would say is that what customers are clearly telling us is that they just don't want to use a net new technology for a net new use case. that they want to be able to run more things on platforms, and they want to get the benefits of all the best of breed solutions out there, but they want to be able to do that on a fewer set of platforms. And that's where I think we are really differentiating ourselves because we truly are a general purpose mission critical platform. When you look at the size of our customer base, the variety of use cases that customers run on MongoDB, the types of customers that use MongoDB, it becomes very, very clear that people can use this for a lot of different things.
spk03: Great. Thank you.
spk10: The next question will come from Jack Andrews with Needham. Please go ahead.
spk15: Good afternoon. Thanks for taking my question. I want to ask a bit more on the 5.0 release. It seems to be one of the important features is you've talked about the ability to have a faster cadence of releases. between major releases. So could you just flush out for us, you know, what should we be expecting in terms of, you know, how do you anticipate, you know, priorities and focus on what to release when?
spk12: Well, we have a pretty rigorous approach starting, you know, our product management organization leads that process, but we take inputs from obviously our sales team, our customer support team, our technical sales organization and as well as we do some top-down analysis in terms of what are the areas that we want to get into. Obviously, we also look at what the competition is doing to understand where they're getting traction and where they're not. And that informs our view in terms of how we want to decide what products to build and in what cadence. And obviously, in our space, it's not like you just build a product and you move on. You come out with a MVP release and then you introduce new features or basically mature that product over time. If you look at even Atlas, Atlas only came out five years ago and the level of feature development on Atlas, even though it was one product, has been enormous. These products just tend to mature over time and so there's a there's always some debate about new features and capabilities versus, you know, maturing and strengthening the existing set of products. And it's obviously a judgment call and there's some art as well as science in terms of how we handle that. And I would say to your point, with a cloud service, we can introduce new capabilities far more quickly than, say, an on-prem version. So we have gone to a quarterly release cycle, which allows us to introduce new features, fix bugs that much faster, while folding in all the new changes and so forth into our on-prem product once a year. That really allows us to continue to innovate fast but still be able to address the needs of the organization and make sure customers can consume MongoDB's capabilities at the rate and pace that they want to.
spk15: Thanks for the color. Just as a follow-up question, could you update us perhaps on progress With the systems integrators, is there a way to frame the proportion of your deals that are maybe SI-driven or SI-influenced these days?
spk12: Yeah, we don't break out that in particular, but I would say a meaningful percentage of our business is done through some sort of partner. Those partners can come in a variety of flavors. We already talked about the cloud providers. To your point, the systems integrators are another key cohort of partners that we work with. We also work with a bunch of ISVs, and they could be either sell-to or sell-through kind of relationships with the ISVs. And so our partnerships play a big role. We have a dedicated partner organization focused on our partners, and they play a critical role in kind of helping us expand our reach and accelerate deals as well as shorten the cycle time to close deals. And with regards to the SIs, we've done business with every major SI in the industry. And so I can't think of one large SI where we haven't done some business with. We're obviously picking and choosing the partners we work with where we think we can have the biggest impact, but we're also working with some boutique partners who have real MongoDB expertise, who bring some expertise, especially since many customers may not necessarily have all the MongoDB skills that they want in their own organization, and they also provide a valuable role in helping us grow our business.
spk15: Thanks, and congratulations on the results.
spk12: Thank you.
spk10: The next question will come from Etai Kindran with Oppenheimer. Please go ahead.
spk05: Thanks. Nice numbers, guys. Just one for me. Dave, maybe you could talk about internationally. You haven't talked about your international mix and how that performed in the quarter. Maybe you can kind of recap for us how patterns internationally are similar or different than they are here in the U.S. and also Is your strategic discussions that you're having with customers now here in the U.S., is that also something that applies internationally, or that's more of a later cycle, say, relative to where you are here in the U.S.?
spk12: So I would say our business is, frankly, strong across the globe. Obviously, in different theaters, the size of business is different, but we're seeing significant demand across the globe. I'll start with Europe. Historically, we've been very strong in Northern Europe, in particular in the UK, but we've really expanded very aggressively to Southern Europe. France, Italy, Spain have become really, really strong markets for us. We've also expanded quite aggressively, as you imagine, to Germany and in Northern Europe, and we're feeling really good about the opportunity there. In fact, we're trying to hire as fast as we can. In terms of Asia, we've seen... you know, burgeoning demand coming out of India and Southeast Asia. It was funny, you know, our sales leadership, when we first launched Atlas, argued that Atlas, the value proposition wouldn't make a lot of sense since the cost of labor was a lot lower in India. You know, Atlas, the value proposition wouldn't make as much sense because people would just hire their own, you know, database administrators. Well, it turns out, you know, people value speed. People value being able to innovate and people value being able to offload undifferentiated work. So, Atlas is going on like gangbusters. Our India team has been crushing their numbers, so we're trying to expand that team as fast as possible. Same in other parts of Southeast Asia. In China, obviously, we can't offer Atlas due to regulatory constraints. So we decided, as I think you may be aware, that we have a relationship with both Alibaba and Tencent. And Alibaba, we're in year two of that relationship, and that relationship is going really, really well. And Tencent is just starting to heat up. As you know, the government there is taking a little bit more scrutiny about what the tech companies can do, but we're not seeing that in our business with those partners. And then in terms of Latin America, while we don't have a huge press in Latin America, we're seeing a lot of demand, so we're trying to service that through our inside sales team and our self-serve channel, and we're And I would tell you that this market is very large and it's truly a global phenomenon.
spk05: Very good. Good luck. Thanks. Thanks, Itai.
spk10: The next question will come from Matthew Broom with Mizuho Securities. Please go ahead.
spk00: Thanks very much. And I definitely appreciate the geographic color there. I guess it's sort of a similar question in terms of sort of, you know, customer particles, if there are any specific. you know, industries that sort of particularly outperformed your expectations or conversely where you would like to see a bit stronger momentum?
spk12: Well, I would say obviously it's a big market, so as you can imagine, our sales teams tend to go, you know, where the business is. We tend to not organize by verticals, but that's something that may change over time as we see, you know, going deeper in accounts, going deeper in financial services, going deep into understanding their particular use cases can have a disproportionate impact on our business. So that's something that we're contemplating. But I would say in general, you know, we're seeing strong across the board performance. You know, MongoDB is truly a horizontal solution and it's really a function of, you know, our coverage model and how many people we have in a region. And because they're organized geographically, they'll go after the, you know, the options the way that they think that they can have the quickest impact on. So, yeah. As you can imagine, companies that are more technology sophisticated tend to be really good customers of ours. Companies who want to build their own custom applications tend to be really good customers of ours. And obviously, every new SaaS company who's coming out, as I think about their tech stack, we want to be part of that tech stack. So we're putting a lot more focus on those companies because as they grow, we're the beneficiaries of their growth.
spk13: Yeah, I would just add if you think about the Q2 outperformance, we talked about sort of strength across the board. We also talked about how enterprise advance was particularly strong. And while sometimes you might map that to certain industries, I think even in the vignettes and customer examples Dave pointed out, really it depends on how someone's, you know, what their architecture looks like and how they're going to consume software. So it doesn't perfectly map to industries. But we had, like I said, very strong performance Q2 really across the board product-wise, but particularly in EA. And then when we look out for the second half of the year, we don't see that, you know, we're not counting on that EA outperformance when you look at the back half, which obviously, you know, impacts numbers.
spk00: Excellent.
spk13: Thanks again.
spk10: The next question will come from Steve Koenig with SMBC NICO. Please go ahead.
spk07: Okay. Hey, thanks for squeezing me in, guys. I'll just ask one question. You know, so I remember back in the day at Oracle when interoperability and portability were big marketing points for them. You know, now their applications have all been built and the marketing message isn't so important for them. But new applications are being developed in the cloud, you know, with new databases like Mongo. Yet, you know, database interoperability is great, multi-cloud is great, but there's a lot of other past services that apps need to hook into besides database. So can you give us more color on how real multi-cloud is today and the customer challenges associated with implementing it? And I think the broader question is long-term, how do you stay ahead of the major cloud vendors who, you know, stand a very good chance of being major forces in this market? Thank you very much, and I appreciate the squeezing me in.
spk12: Yes, so if you talk to any developer, they will tell you that the most amount of time and effort that they spend on is working with data. So the database tends to be a place where they spend a particular amount of time, and that's where they have the biggest challenges, and that's where we see the biggest opportunities. So while they have to integrate with other solutions and they may have to build a range of microservices, every microservices, for example, will need a database. And so while applications are getting decomposed into small, smaller piece parts like microservices, the database still plays a very, very important role. And so, yes, when a customer builds an application, they may tie into other services that the cloud provider may offer, but a big factor in terms of what application they build, how quickly they can innovate, how fast they can add features is directly correlated to what database they're using, which is why we win. And I would say that to your second question, compared to cloud providers. We have been competing with the largest companies in the world, obviously Oracle and others in the early days, and then the cloud providers, including Amazon and Azure, with their own competitive offerings for the longest time, and we've held our own. And the reason we've held our own is that we have built a very, very strong set of IP with the document model. It's proven to be the best way to work with data, Even though it's an open-source product, we have a strong IP mode around it, so the cloud providers cannot just take our free version and compete with us, unlike a lot of other open-source technologies. And with the success of Atlas, when we went public, there was some degree of skepticism by some investors about could we really compete by building our own cloud service, going head-to-head with the cloud vendors. Well, I think the results speak for themselves. There aren't many businesses... that are growing at over 80% that are at a half a billion dollar run rate. And I think that speaks to the IP that we have, it speaks to the value the customers are getting, and it speaks to our ability to execute.
spk07: Great. Thanks very much, Dave. Thank you.
spk10: This concludes our question and answer session. I would like to turn the conference back over to Dave Editeria for any closing remarks. Please go ahead, sir.
spk12: Thank you. I just want to leave you with a few comments. First, I think what we really want to reinforce is that we believe customers realize that if they want to move fast, MongoDB is the best way to do so. Second, Atlas' growth of 83% reinforces the point that customers want a multi-cloud platform that enables them to innovate quickly and outsource the undifferentiated heavy lifting of managing their data infrastructure. Third, we continue investing involving a go-to-market strategy across field sales, inside sales, and the self-serve channels to capture this large market opportunity. And last but not least, we continue to roll out significant innovation to improve our platform through both ease of use and expansion of capabilities to encourage more and more customers to use MongoDB. So thank you for your time, and we'll talk to you next quarter. Take care.
spk10: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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