Good day, and welcome to the MongoDB Fourth Quarter Fiscal 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian Denyeau, ICR Investor Relations. Please go ahead, sir.

Thank you, Don. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter and full year 2018 financial results which we announced in our press release issued after the close of market today. Joining me on the call today are Dev Ittycheria, President and CEO of MongoDB; and Michael Gordon, MongoDB's CFO. During this call, we may make statements related to our business that are forward-looking under federal securities laws and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our financial results; trends and guidance for the first quarter and full year fiscal 2019, industry and market trends; our go-to-market and growth strategies; our introduction of future product enhancements and the potential advantages of those enhancements; our market opportunity and ability to expand our leadership position and drive revenue growth; our ability to maintain and upsell to existing customers; our ability to acquire new customers; our ability to expand our relationship with the partners and anticipated benefit of our platform for our customers and partners. The words anticipate, continue, 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 reflected upon as representing our views as of any subsequent date. We do not have plans to update these statements except as required by law. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our quarterly report on Form 10-Q filed with the SEC on December 15, 2017, and our other periodic filings with the SEC. These documents are available in the Investor Relations section of our website at www.mongodb.com. A replay of this call will also be available there for a limited time. The development, release and timing of any features or functionalities described for our products remain in our sole discretion. This information is merely intended to outline our general product direction and should not be relied on in making a purchasing decision or is a commitment, promise or legal obligation to deliver any material code or functionality. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release in the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. And with that, I will turn the call over to Dev.

Thank you, Brian, and thanks to all of you for joining us today to review our fourth quarter results. MongoDB delivered strong performance across the board, which reflects our growing market momentum and position as the leading modern general-purpose database platform. To quickly summarize our fourth quarter results, we generated revenue of $45 million, a 50% year-over-year increase and above the high end of our guidance. We ended the quarter with over 5,700 customers, up 78% compared to a year ago. We saw strong growth across both Enterprise Advanced, EA for short, and Atlas customers. And now Atlas is over 10% of revenue, representing more than a 500% increase from a year ago. When looking at the larger industry trends, it has become clear that the success of every business rests on their ability to use technology, and in particular, software and data to create a competitive advantage. Businesses want to quickly develop new products and services to drive new revenue streams, improve the customer experience to engage them in a more meaningful way and to constantly find ways to reduce the risk and the cost of doing business. As a result, nearly every business is fast becoming a software business or at risk of being eaten by one. But these digital initiatives often fail. KPMG issued a study last year that found that 88% of CIOs don't think they have fully benefited from the digital strategy and 82% don't believe their companies are effective at using technology to advance their business. One of the main reasons they fail is their inability to leverage their data. A study by Localis found that companies don't think they are good at using their data, with more than 40% of CIOs mentioning that their data is too siloed across the organization, it's highly…

Thanks, Dev. As mentioned, we're very pleased with our fourth quarter results which capped a strong year for MongoDB. I will begin with a detailed review of our fourth quarter and full year results and then finish with our outlook for the first quarter and full year fiscal 2019. Total revenue in the quarter was $45 million, up 50% year-over-year. Subscription revenue was $41.9 million, up 54% year-over-year. And professional services revenue was $3.2 million, up 16% year-over-year. The strong performance of the business was broad-based during the quarter, with healthy new logo and upsell activity among enterprise customers as well as continued rapid adoption of Atlas. Atlas represented 11% of revenue during the quarter, up from 3% in the fourth quarter of last year and representing an annualized revenue run rate of over $20 million. We continue to see strong global demand for our offerings. During the fourth quarter, we grew our customer base by approximately 800 customers, bringing our total customer count to over 5,700 customers, which is up from over 3,200 customers in the year-ago period and over 4,900 customers at the end of last quarter. Of our total customer count, over 1,450 customers are direct customers, up more than 20% from the year-ago period. The growth in our total customer count is being driven, in large part, by Atlas, which had over 3,400 customers at the end of the quarter compared to over 2,600 at the end of the quarter -- of the third quarter. The growth in total customers includes growth in our Enterprise Advanced customers as well as new Atlas customers. It is important to keep in mind that the growth in our Atlas customer count reflects both new customers to MongoDB as well as existing Enterprise Advanced customers adding incremental Atlas workloads. We…

[Operator Instructions] And we'll take our first question from Sanjit Singh with Morgan Stanley.

Congrats on the 50% growth this fiscal year, very impressive. Maybe I just want to start with, Dev, on the ACID transaction subject. Could you give us some examples of what use cases are now available or maybe types of applications that are now available that weren't before prior to this introduction of 4.0?

Yes, so a good example would be, say, an e-commerce use case where, say, someone is ordering something, some widget, and associated with that order is some inventory management system that has to [ deprecate ] the number of widgets that they are holding at a particular location. So in that situation, you want to have a transactional guarantee from ordering a particular widget as well as decrementing the number appropriately in the inventory management system. So those 2 data sources would be in 2 separate collect -- document collections, and that's where ACID transactions would be -- multi-document ACID transactions would be very helpful. Did that answer your...

That's very helpful. And then -- yes -- no, that was great. It makes a lot of sense. Michael, in terms of -- we're obviously seeing a lot of traction with Atlas, 11% of revenues. Any sense of the pace of how that revenue contribution should evolve next year and beyond?

Yes, so we're not giving a specific guidance number for Atlas in fiscal '19, but we've been very pleased with the performance and the results of Atlas so far. I think if you think more holistically, though, our primary goal in the sales channel is getting customers to understand the value proposition of MongoDB. And as Dev mentioned, one of the 3 key pieces is the ability to run anywhere. And so we're less focused with whether customers are deploying on prem, in cloud, consuming in a subscription model or in a consumption model, but really, we want to be focused on having MongoDB appreciated and permeated throughout the organization. And so that's really the key focus. And so far, the results show that we're having success with that.

Great. That makes a lot of sense. And then maybe just a follow-up, maybe a 2-part follow-up to Atlas. Any plans to release a more commercial version of Atlas? I know it's monetizing with a free offering today, but any plans to release some of -- maybe an enterprise version of Atlas this fiscal year? And the second part of that question would be, if you can give us a sense of what the impact is on your invoice durations from Atlas constituting a bigger part of your bookings mix would be very helpful.

Yes, sure. So we definitely are -- as part of our roadmap, have a very robust roadmap in terms of adding new capabilities to Atlas. And so unlike EA, where you get all the proprietary features literally out of the box, with Atlas, we will offer more of an a la carte model where customers can pick and choose new features and capabilities that will be an upcharge to the base offering. So those could be things like security offerings around auditing, things like connecting to sophisticated key management systems that a particular cloud provider may offer, things around like enabling a connection to your BI tools through a BI Connector that will launch on Atlas. So those will be just a small smattering of things that we have planned. We have a very robust plan. But unlike EA, where you basically get all the proprietary features as part of the licensing, with Atlas, it will be more of an à la carte model, which I think will attract customers, a broader set of customers, who may pick and choose what capabilities they want now versus later. I'll let Michael answer the second part of that question.

Yes, so if you think about the models, over time, they'll more converge, even on their financial attributes, not just sort of on a product functionality standpoint. Today, and historically, there've been kind of 2 main aspects that are different. There's the margin profile and then there's sort of the billing and the cash flow dynamics. I think that, as evidenced by the result, we've continued to make progress and better progress than we had originally forecast on the Atlas margin. There's more work that we want to do there, and we'll continue to do, but so far, we're very pleased with that progress. On the billings and cash flow side, Atlas can be consumed in a couple of different ways. There's the self-service component to Atlas, which is very much sort of consumption-based and paid in -- monthly in arrears and invoiced monthly in arrears, so that obviously has an effect on deferred revenue and, ultimately, the billing [ calculation ] that you all do. But we're also seeing increasing traction for the sales force for applications where they don't need the full advantages, they'd don't need the full functionality of Enterprise Advanced being able to sell Atlas today. And some of those relationships are being struck on a paid-in-advance basis and others are being struck on a monthly invoicing basis. So there's sort of a mix across the board, if you will. From a macro perspective, we don't see the increasing mix of Atlas changing our timing to get to free cash flow positive. The self-serve customers do -- are monthly in arrears, and so that is different. And from sort of the calculated billings, which we don't focus on as a management metric, but you should understand there's certainly a billings and cash flow impact of that in the short term.

For our next question, we'll go to Raimo Lenschow with Barclays.

Dev, can you talk a little bit about the ACID compliance? It seems like a very important point that you mentioned on the call. How do you see that playing out in the market in terms of -- I mean, it's something that, for a NoSQL database, it's kind of unusual. So how do you expect it to play out with customers? Are they kind of doing all -- lots of tests now to see how they can use it? Do you see kind of a faster uptake? Or like -- it's kind of an unusual development and kind of -- I struggle to -- a little bit to understand how that's kind of -- will impact your markets?

Sure, sure, sure. So customers actually have been incredibly excited by our announcement because candidly, when you've grown up knowing databases and it's been drilled into your head that ACID transactions is an incredibly important feature that every database must have, but you are very attracted by the power of MongoDB's document model and its distributed architecture, some people still feel a little nervous about using MongoDB for many use cases, even though they don't really need multi-document ACID transaction support. So the first thing this does, it just gives customers real peace of mind. When we made the announcement, literally our salespeople got calls from lots of people. We had meetings in a very short period of time with CIOs. In fact, I had a meeting with one CIO and he said, "Geez, if I had to rebuild my application portfolio, I'd never have to use another -- a relational database." And so the receptivity of that has been very strong. And the reason it's really strong is that they literally can have their cake and eat it, too. They can get all the data guarantees that they're used to with their legacy database with the power, the scalability, the availability and the ability to be very sophisticated about where you put your data for things around GDPR and other compliance issues or things around, if you have a globally distributed user base, moving the data that's most relevant to them to a particular geography for low latency access. Now that becomes incredibly powerful for customers. And as I mentioned earlier, there are some niche use cases where it actually becomes quite important. So now with the availability of multi-document ACID transaction support, we believe that there's not one use case that we can't do better than a traditional database.

Okay, that's -- yes, that's really -- that's what I thought. Like it's -- that's pretty exciting, actually, yes. And then can you talk a little bit, too -- I know we live in a world of coopetition, and if I listen to AWS at their conference in November, there was sort of more noise around NoSQL as well, but then I see also now the partnership. Can you just kind of see how you -- can you talk a little bit about how you see that playing out?

Yes. Amazon is clearly an important partner of ours and so are the other cloud providers as well. The announcement we made with the AWS Marketplace is that their customers can actually buy Atlas through the Marketplace and use their own credit, that they may have already kind of made committed to with Atlas, to apply towards Atlas, which is very compelling as well as get billed directly by Amazon for those services. Moreover, and as we -- as I mentioned in the prepared remarks, we also have joined their SaaS alignment program where their own salespeople get commissioned for selling Atlas. So Amazon is a company that really allows its teams and its groups to operate fairly independently and autonomously. And so the [ P teams ] that -- in the core hosting group, the people in the Lambda group, the people in a lot of other groups are very excited about Atlas. Clearly, the people who offer a competing database offering are not necessarily our partners, but overall, Amazon does a very good job of managing this relationship, and we're very excited about the partnership with AWS.

Okay. And last question for me is can you -- the increase of number of large deals seems kind of -- seems really exciting. Can you talk a little bit about what you see in the field? Was that kind of special year this year? Or like -- because 20 versus 2 seems like a big jump.

Yes, I think it speaks to a couple of things. One, I think it speaks to the maturity of the product, where people have seen the product evolve very quickly over the last few years and have been -- are really -- are comfortable using MongoDB for mission-critical workloads. It speaks to the sophistication of our sales force and our go-to-market model, where we can be more effective in capturing customers. And also speaks to our land-and-expand model where, once you get in -- as Michael mentioned, we still have such a small percentage of the wallet share that those customers spend on database software. And given the very clear and compelling benefits of MongoDB's features and architecture, our sales teams have been very aggressive in going after those existing workloads that are running on traditional databases. The last thing I would say is that given all this, we're actually getting more bold and being more aggressive and basically going higher earlier in the engagement cycle rather than just starting lower with, say, a department level or a certain business level -- business unit level kind of group. And so that's also starting to pay dividends in terms of larger deal sizes. And as -- while we don't disclose our deal sizes, over time they definitely trended up and to the right, and we feel like that trend is not going to stop anytime soon.

We'll take our next question from Heather Bellini with Goldman Sachs.

Most of my questions, at this point, have been answered, but I wanted to dig a little deeper on what Raimo just said in regards to the $20 million with customers over $1 million in ARR. I'm just wondering, is there a commonality amongst those customers, whether it's by vertical that they're in or type of application that they're deploying that you could share with us? And also, just given the rapid adoption and uptake of Atlas, just wondering -- I think you got asked a little bit earlier about the type of apps there, but again, just wondering if there's commonality amongst the customers that you're seeing that you could share with us.

Yes, so the short answer is there's no commonality in terms of the type of customers. We're seeing that in financial services, we're seeing that in telecom, we're seeing that in tech, we're seeing that across a broad set of vertical industries. I think the commonality is, frankly, the ability for us to go high and connect and be able to clearly articulate the value of moving to a much more modern and cost-effective and flexible platform. And when that message resonates with the senior people in the organization, they tend to move much more quickly and aggressively and tend to be more forceful in driving a lot of the migrations or the new use cases that they're going after. So we, as an organization, are actually starting to institutionalize that across the entire sales force, where we believe that, for the same amount of time and effort, we can actually get a better yield out of the sales organization by starting higher in the organization. So that will take some time for all our salespeople to get there, but we are very excited about the opportunity. And it doesn't hurt to have a lot of great customer proof points. Some of the most sophisticated and demanding customers are using us for very, very important use cases, and so that gives customers even more confidence in going with MongoDB.

Yes, I'd say, the other thing, if you're looking for patterns, that they would tend to be sort of the expression of the strategic piece that Dev's talking about, is the number of applications that a customer is running. Like it's unusual that it would be a single application that is at that level of spend, but it's that you're -- you've broken through from that initial application and you've become more strategic and are starting to permeate the balance of the organization where you start to see the momentum and the relationships expand to that kind of size.

We'll take our next question from Richard Davis with Canaccord.

Actually, to corroborate your answer to Raimo's question, I was actually talking to a CTO who uses Google Dialogflow, NoSQL and Atlas on AWS. So I think you're right. It's kind of a multi-factor world for a long time. So one quick question. Just a tactical question on technology and just a real quick question on number. So tactical question, how hard is it to do kind of a port over -- stumbling block that you face as -- a live migration of -- to a new version of Mongo or from an old version to a new one? And so how have you solved that question? And then on the numbers, just -- we ran back-of-the-envelope numbers. We get like an LTV to CAC of like 2:1, and I don't know if that's right because we're outsiders. Are you able to -- do you think you can get to 3:1? Or what's your thoughts on that? So 2 quick questions.

So on the first question, we actually -- one of the design principles that's been from the get-go here at MongoDB is to really have customers not suffer any downtime. So whenever they migrate from one release of MongoDB to another release, we literally do it in a very seamless and graceful way. We do it node by node, where we never have to take the application down. And we've also built tools to help customers do that in a way that helps them through the process, and we also have a professional services team that can also help with planning and executing those migrations. But in general, it is a far easier and less onerous process than doing it with a legacy database. And then in terms of your second question, was -- I forgot. What was your...

LTV to CAC...

LTV to CAC related. Yes, so Richard, here would be my high level. Obviously, we don't give out specific numbers on that. I think what we shared in the context of the IPO is the contribution margin analysis which showed some pretty attractive returns on the investments that we're making in sales and attractive paybacks, but I think importantly, also showed significant growth even 1, 2 years into a cohort's lifecycle. And so given the strong retention and the strong net ARR expansion rates, when we look at the unit economics, they're very, very attractive. I think the one thing that if you were to kind of take a snapshot in time, that burdens the current -- our current point of view is we still have a very high percentage of the sales force that is ramping. And so those people are not productive as we're in the early stages of trying to capitalize on the opportunity in front of us, and so they would burden any kind of current period analysis. But even when we do that analysis today, we're very pleased with the returns that we're getting on the investments we're making in the sales and marketing efforts.

We'll go now to Pat Walravens with JMP Securities.

So my first question, Dev, would be around your new head of sales and what you're looking for in that candidate. And then sort of related, what degree of changes do you have planned to territories and comp plans and things like that in fiscal '19?

Well, the good news is that all of the territory planning and the comp plans are already done. And we typically start that process in Q4 and roll that out in early Q1, so that's already behind us. So -- and it's just -- there tend to be some incremental changes around the edges of the plan. We get feedback on what happened last year, incorporate that in some of the goals that we're trying to drive this year. So that's point number one. And point number two, this is a pretty interesting business and a fairly unique business because we're selling to a very sophisticated technical audience, but we also have to sell high. So we need people who know how to kind of clearly communicate the business value high, but can also kind of engage with technical stakeholders, developers, architects and so forth, to really ensure that they are fully bought in and understand and appreciate the power of our architecture. And then the other thing about our business, unlike, say, an application software or, frankly, even like hardware, is that this is a little bit of a conceptual sale in the sense that you can't really see, feel or touch MongoDB. It's really driving an outcome, whether it's helping you build out an application or giving you insights into your business and so forth. So you have to be comfortable selling -- making a conceptual sale, and so that's also an important skill. The third thing is that we have a very strong sales organization. The management bench is very deep. I was actively involved in helping recruit senior leaders to the sales organization both at Carlos' direct report level, and 1 level below. So I have a lot of intimacy around the organization, and I'm very proud of what we've built. So I don't feel the need to make any wholesale changes and so forth, and I don't feel in a rush to go hire someone tomorrow. Like we want to be very thoughtful. As I mentioned, we're going to do a search and look both at internal and external candidates.

Okay, great. And my second question is broader. I'd love to hear you just comment on sort of what you're seeing in terms of broader trends in the database market and how Mongo is inserting itself into those conversations to sell. In particular, are people lifting and shifting sort of these core database workloads?

Yes, so I would say that we're starting to see the beginnings of a real platform shift. What's interesting is that everyone's trying to use technology as an enabler to drive their competitive advantage. And invariably, they recognize that being able to leverage their data is an important part of being able to achieve that goal, but what they typically find is that data is not an enabler, but a blocker. And it's a blocker because it's kind of trapped in legacy infrastructure, it's very siloed across the organization. And so we're starting to see people really put a lot of focus around app modernization or legacy modernization. And that's also obviously buffeted by the desire to potentially move to the cloud as well as desire to roll out new use cases. New use cases around like machine learning, AI, even things like IoT, et cetera, are driving the need to be much more effective in using data. And so we're starting to see a real focus on doing that. The second thing I would say is that there seems to be a real antipathy towards the existing incumbents. And so that's also driving a lot of senior-level stakeholders to contemplate going to a new vendor, and I think we are well positioned. And as you know, we have massive customer -- I'm sorry, developer adoption. We're the only database company to go public in the last 20 years. We've raised a lot of capital to drive our business, and so we basically feel very well positioned to pursue this opportunity and that's resonating with customers.

[Operator Instructions] For our next question, we'll go to Jack Andrews with Needham.

I just wanted to follow up on some of the other commentary. You mentioned that you're engaging higher in the organization through your sales process. So in these customer conversations, do you still need to spend any time evangelizing the overall technology value proposition? Or do customers get it at this point? And how would that compare to these conversations maybe 6 or 12 months ago?

It's a good question. So I would say it's kind of -- it spans across the board. So we may be talking to customers who are very intimate with MongoDB and they're now just looking to really expand their use of MongoDB in a very aggressive way to all the way to the other end where people have very limited understanding and so there needs to be a lot of education around the document model, the value of the document model, the value of our distributed architecture and also the fact that they have a variety of options. And actually, that's one of the benefits of MongoDB is that they have optionality to run it themselves on prem, run it themselves in the cloud or go to a more consumption-based model like Atlas or do some hybrid combination thereof, depending on what workloads they want to use where and when. But that does kind of require some education. What we find is that if you go high and really link ourselves to some of the more important business initiatives, people may be trying to improve their -- the experience that they offer to their customers, people may be trying to build out new products and services. And so the more we can tie ourselves to some of the businesses initiatives that they're trying to drive and explain to them how MongoDB can help address that problem, and then explain why we're the best solution to do so, that tends to accelerate deals as well as the size of those deals. And that's essentially what our sales team is starting to do now.

Sure. I appreciate that color. And then I guess just a quick follow-up, could you just touch on the mainframe modernization practice that Tata is building out? I mean, how prevalent do you think these mainframe modernization can be as a use case moving forward?

I think they're huge. And I say that -- just for a little bit of color. My background, I used to be the President of BMC Software. And while I didn't run the mainframe business, I saw that business pretty up close, and I was always amazed how that business kind of chugged along. I think we're reaching an inflection point, frankly, for a number of reasons. One is that there's just -- the mainframe developer community is candidly retiring, and so finding people who still want to build apps on the native platform, on the native mainframe, it's hard to find. IBM actually funded us to port MongoDB to the zSeries Linux. So as I mentioned in that one use case, we had a car rental company who had a very complex reservation application that was built on the -- on a legacy database that they ported to MongoDB on the mainframe today, but then it gives them real optionality to then move off the mainframe to either go on prem or, ultimately, to the cloud. We've seen customers like Barclays, who basically moved off mission-critical consumer applications in the U.K. off the mainframe to MongoDB. And candidly, we're starting to see that all over the place. I think people are starting to realize that there's limited utility in continuing to invest in the mainframe, and so they're very open and very interested in trying to use MongoDB to help modernize that platform.

That does conclude today's question-and-answer session. At this time, I'll turn the conference back to Mr. Dev Ittycheria for any closing remarks.

Yes, again, I want to thank you all for listening to our earnings call. We're really, really excited about Q4 -- what happened in Q4, but even more excited about the future. We feel like the combination of the product, the team, the market and the larger secular trends are all in our favor, and we're very excited about a strong 2019. So thank you very much for your time, and we'll speak to you soon.

That does conclude today's conference. Thank you for your participation. You may now disconnect.