Good day and welcome to the MongoDB First Quarter Fiscal 2020 Earnings Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Brian Denyeau, ICR Investor Relations. Please go ahead.

Thank you, Justin. Good afternoon and thank you for joining us today to review MongoDB's first quarter fiscal 2020 financial results which we announced in our press release issued after the close of market today. Joining the call today are Dev Ittycheria, President and CEO of MongoDB; and Michael Gordon, MongoDB's COO and CFO. During this call, we may make statements related to our business that are forward-looking under federal securities laws. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our financial guidance for the second quarter and full year fiscal 2020, our market opportunity, the impact of market trends on prospects for future growth, the benefits and the impacts of recent acquisitions, the anticipated benefits of our products for our customers and the opportunities presented by our partnerships. 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 considered 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 the material risks and other important factors that could affect our actual results, please refer to those contained in our annual report on Form 10-K filed with the SEC on April 1, 2019 and other periodic filings with the SEC. These documents are available on 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. Additionally, non-GAAP financial measures will be discussed in the conference call. Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Dev.

Thanks, Brian. And thanks to all of you for joining us today to review our first quarter results. We are very pleased with our performance for the first quarter. Our great start in fiscal 2020 reflects strong execution by the MongoDB team and continued momentum across all aspects of our business. We also are benefiting from the previous product and go-to-market investments we made to ensure we fully capitalize on one of the largest market opportunities in software. In fact, IDC recently updated its forecast and expects the worldwide database software market to grow from $64 billion in 2019 to approximately $98 billion in 2023. We believe that much of this incremental $34 billion will come from modern applications and new workloads, which we are well positioned to capitalize on. Looking quickly at our first quarter financial results, we generated revenue of $89.4 million, a 78% year-over-year increase and above the high end of our guidance. We grew subscription revenue 82% year-over-year. Atlas revenue grew more than 340% year-over-year and now represents 35% of revenue. We had another strong quarter of customer growth, ending the quarter with over 14,200 customers. These results are a powerful indication of how MongoDB continues to benefit from a number of positive market trends. First, for a new platform to succeed, it has to be embraced by the developer community, given the disproportionate influence developers have regarding technology decisions. Our developer mindshare and financial results demonstrate that MongoDB has clearly established itself as the most popular modern database platform in the world. Second is the growing recognition that, because working with data is so critical in building applications, using a modern general purpose database platform enables businesses across every industry to innovate faster and respond more quickly to new market opportunities. Customers are increasingly choosing…

Thanks, Dev. As mentioned, we're very pleased with our first quarter performance which reflects best-in class growth at meaningful scale. I'll begin with a detailed review of our first quarter results and then finish with our outlook for the second quarter and full fiscal year 2020. As a reminder, starting this quarter, we are only reporting our current and historical financial results on an ASC 606 basis. In addition, for convenience, we have also included in our earnings release an additional table with our historical customer count data. I'll now turn to our first quarter results. Total revenue in the quarter was $89.4 million, up 78% year-over-year. Subscription revenue was $84 million, up 82% year-over-year and professional services revenue was $5.4 million, up 33% year-over-year. As a reminder, our first quarter results include the impact of mLab which we acquired in November 2018 and performed in line with our expectations. Excluding mLab, the organic growth in the business remained very strong, consistent with the last few quarters, and we are very pleased with our first quarter results. The strength in the quarter was broad based across geographies, industries and use cases. We're pleased with the increasingly strategic nature of our customer wins, which is driving larger new logo additions and continued strength in upsell activity. We're also seeing rapid adoption of Atlas, which grew over 340% in the quarter and now represents 35% of total revenue compared to 14% in the first quarter of fiscal 2019 and 32% last quarter. During the first quarter, we grew our customer base by over 800 customers, bringing our total customer count to over 14,200, which is up from over 6,600 in the year-ago period. Of our total customer count, over 1,800 are direct sales customers, which compares to over 1,550 in the year-ago…

Well, thank you. [Operator Instructions]. Our first question comes from Raimo Lenschow with Barclays Capital.

Hey, thanks for taking my question and congrats for a great quarter.

Thanks, Raimo.

Dev, I apologize for the question already, but can you talk a little bit about Realm because – so when we talk to the guys in the field, they were super excited about it because they see like, look, mobile is a really important part of what's going on, but I'm not quite sure I fully get it. Could you just talk me through that? And then, I have a follow-up for Mike.

Yeah, sure. So, much like the founders of MongoDB, the Realm founders came from Nokia. So, they had a lot of experience building databases for mobile devices, especially for featured phones, and they saw all the challenges with those legacy solutions. So, they've built a database optimized for the mobile device, including very sophisticated data synchronization protocol to basically synchronize data back and forth from the mobile device to the back-end server and vice versa, especially dealing with slow or intermittent connections. Moreover, they built a very sophisticated API, so as data changes, the UI would be updated in real time. And the trend now is to build these very rich mobile applications that represent data in real time. And data is the biggest challenge with mobile. And so, we were very attractive to Realm because of the developer mindshare they have. Much like MongoDB, their data model is very similar to ours, and so they had a lot of developer traction. And we will be making some specific product announcements at MongoDB World about how we're integrating Realm into the larger MongoDB platform.

Okay, perfect. That helps. And then, a follow-up for Mike. Mike, as you said, two-thirds of Atlas revenue is not in deferred. Is there a way to think about like maybe ARR, something to kind of give us more visibility or what's the best way you suggest for us to kind of track the progress?

Yes. So, I think as we've talked about before, it continues to be – revenue is the core way of looking at it. We're trying to provide sort of additional slices, given both the self-serve nature as well as the sale/sold [ph] nature. But as we've talked about before, specifically looking at deferreds really winds up missing the picture, which is why we wanted to provide the incremental sense for like the order of magnitude of how much of Atlas currently is not flowing through deferreds.

Okay, perfect. Thank you. Congrats.

Thanks, Raimo.

Thank you.

And next will be Sanjit Singh with Morgan Stanley.

Thank you for taking the questions and congrats on another excellent quarter. Dev, maybe I want to start…

Hi, Sanjit.

Hi, Dev. How are you?

I'm well.

Maybe just to start off on, and a follow-up to Raimo's question, on server-less, can you give us a sense of where server-less adoption in terms of workloads are versus maybe like containers in the Kubernetes movement, is it lagging by a year or two? What's the uptake on server-less? And probably outside of AWS, is that beginning to start to gain some traction as well?

Yeah, we're seeing – obviously, server-less got a lot of hype couple of years ago. And I would say, we're just starting to see customers really start adopting server-less. It's still very, very early days. Frankly, our announcement of Stitch was our version of server-less, which is a much more sophisticated version than, say, Lambda with the capabilities we had in terms of providing data access and being able to integrate to other third-party services. And I would say that it is a trend that we foresee in the future, an increasing trend in terms of how applications are built, and that's something that we're planning for.

Excellent. And then, maybe just to sort of mark-to-market on some of the trends around MongoDB overall and Atlas, and I remember sort of, at the time of IPO, we were talking about most of the use cases around the document model supporting transactional applications, but there was a potential opportunity to get more analytical workloads and maybe graph database workloads. Where are we in terms of that multi-modal adoption as customers sort of are subsuming multiple use cases on to the databases platform? Any sort of color there?

Yeah. So, we believe that the document model is a superset of the relational and the key value stores. So, for example, we support Joins. We have far more functionality than a key value store, though we can mimic a key value store especially with the tunability of our consistency model. And then, in terms of analytics, in fact, we've recently announced, on Atlas, analytic nodes where you basically have now read-only secondaries where you can use our BI connector to run reports on your production workloads without impacting user performance. This is something that other databases just cannot do. So, that is something that we support. And you're going to see analytics continue to be a big part of the MongoDB story going forward.

Excellent. Looking forward to Analyst Day.

Cool. We look forward to seeing you then.

Thank you. Our next question comes from Heather Bellini with Goldman Sachs.

Yes. Hi, Dev. I was wondering – there's been a lot of, I guess, challenges in the overall infrastructure software market and, obviously, predominantly the on-premise vendors over the last couple of trends that we've seen over the last few weeks. I was wondering if you could share with us kind of anything you're noticing from a deal closing environment or just kind of commentary on overall IT spending that you could share with us that you're hearing from customers. And also, if there is anything that you could share with us just about how you've seen customers respond. It doesn't seem like AWS is offering – is gaining much traction, but just kind of, if you've seen – if you've heard from many customers about feedback and if it comes up in any customer conversations at all? Thank you.

Yeah. So, on the infrastructure spending environment, we feel very good about the environment. In fact, we just finished up our QBRs with our sales teams around the world and a big push is to recruit more aggressively because we see a very big market opportunity in front of us. And so, we feel very good about our positioning. We feel very good about our competitive advantage against all the alternatives and substitutes out there. We're seeing more and more customers adopt us for mission-critical workloads and it's not just a North American phenomena. We're seeing that in EMEA, LatAm and Asia-Pacific region. So, we feel really good about the trends that we see. And part of that reason is that, if you think about what's happening in the macro environment, the way apps are being built and the decomposition of MongoDB Atlas into micro services, the move to the cloud, and the need for a hybrid environment, the desire to consume infrastructure-as-a-service, the desire to support a multi-cloud environment all play to our strengths. And I think the recognition that the document model is the easiest way to work with data. So, we feel really good about that. And while this is a big market, obviously, it attracts a lot of big competitors. We don't see any changes in the competitive environment. And I must remind you that this is not a winner-take-all market. So, other vendors don't have to die for us to win and we feel very good about the market trends and the opportunity in front of us.

And then, I just had a follow-up, if you don't mind. Atlas now is – I think you said it was 35% of total revenue. If you look out three years, like, what do you expect that to be? How do you see that growth trajectory on a percentage of revenue basis kind of continuing?

Yeah. It's hard to answer that question with any level of specificity. But I'll tell you directionally that we definitely believe the future is in offering cloud services. As we've mentioned in the past, a few quarters ago, Atlas and Enterprise Advanced were at feature parity. Now, we are leading with new features on Atlas itself. So, you actually see new features introduced on the Atlas platform before it gets incorporated back into our on-premise product. And so, we're big believers in the move to the cloud. We are big believers in the fact that customers will not want to put all their workloads in one basket. So, multi-cloud model will be important. And for larger customers who made large investments in their own infrastructure that are sunk costs, they'll want to also have a hybrid environment of an on-prem cloud environment. So, we think we're well-positioned there as well.

Great, thank you.

Thanks, Heather.

And next will be Brad Reback with Stifel.

Great. Thanks very much. Dev, maybe sticking with Atlas first, can you give us a sense of what the net expansion rate looks like in that business versus the overall business maybe on a cohort perspective?

Yeah. The net expansion rate is definitely higher than our overall blended business. We don't publish that number, but it's just a function of the fact that customers can consume infrastructure more quickly. They don't have to go provision more internal capacity or deal with any of the operational issues of provisioning more capacity. And so, we find that the net expansion rates are higher than our blended rate that we've disclosed, which is, for the 17 quarters in a row, has been over 120%.

Great. And then, just following up on your commentary around the SIs and the strong traction you're seeing there, are there any commonalities around use cases, verticals, geographies? Thanks.

Yes. So, I would say, the commonality is that customers are increasingly using SIs as their application development arm and they're, obviously, at the forefront in terms of how applications are being built. And so, there's a natural synergy between us and them because, as they build apps and they choose MongoDB, that drives revenue for us and, obviously, drives meaningful application development revenue for them. So, there's a natural synergy between us and the larger SIs, and we're working with a number of them. People like Accenture, Capgemini, Infosys, TCS, Cognizant and a bunch of boutique vendors all around the world. And the use cases are quite varied. Some SIs are focused on the financial services sector or the healthcare sector. Others are more horizontal. Others have a more of a geographic focus. So, it really depends on the partner. And so, we typically try and work with a partner that's best positioned in a particular customer account. And then, we have, obviously, some strategic relationships that span all theaters and it just depends on the situation of who we partner with.

Excellent. Thanks very much.

Thanks, Brad.

Next will be Brent Bracelin with KeyBanc Capital Markets.

Hi. This is Clarke Jeffries on the call for Brent. Maybe, Dev, for you, as you start to invest in these technologies and maybe outside of the core document database, what are the core considerations that you're mulling over as you choose technology? What do you see as having the lasting benefit to the developer? Do you see there being plenty of opportunity to be tactical on just really the pain points of the legacy technology?

Yeah. Our vision is that we want MongoDB to be the best platform to build modern data applications, and so that's our overriding strategy. I will tell you that I don't want to steal our thunder from MongoDB World, but we'll be making some very interesting announcements there. As I mentioned, we'll be talking about how we plan to integrate Realm into the core platform and a bunch of other new announcements. But it's all in the spirit of making MongoDB truly the best platform to build modern applications.

Great. And then, Michael, just given the relative strength of maybe the Enterprise Advanced business and deferred revenue, were there any significant multi-year deals signed in the quarter that may have been a benefit to revenue? And then, sort of as you look at the full year, is that 5% contribution to this year changing at all? Thank you.

Sure. Yeah. No, I think as we said in the prepared remarks, and as we've seen pretty consistently over the last several quarters, the performance is quite broad-based. And so, whether that be by geography or product line or channel, however you want to think about it, it's really been quite broad-based and enterprise advanced had yet another good strong quarter as well. There were no – there was not a disproportionate amount of multi-year deals relative to what we would have expected in this quarter. And I don't know what the 5% that you're talking about is. I don't know what that reference is.

Just last quarter commentary on maybe multi-year contribution to revenue being about 5% for the full year?

Yeah. So, the 5%, just to be clear, was just – it wasn't multi-year. It was just simply the impact of 606 relative to 605. So, it wasn't a multi-year comment in general, but it was just the impact of including the term license component as opposed to have everything be ratable.

Yeah, understood.

Yeah. So, I certainly don't – we haven't seen anything that would have us alter that view.

[Operator Instructions]. The next question will come from Ittai Kidron with Oppenheimer.

Hi. This is Vinod Srinivasaraghavan on for Ittai. Thanks for taking my question and congrats on the quarter. I just wanted to talk about the SSPL for a second. How are your talks with industry stakeholders going? And can you comment on any future licensing changes at this time? Thank you.

Yeah. So, just to make sure everyone is up to speed, all our products today are licensed under SSPL. We did withdraw ratification of the SSPL with the OSI because we thought it'd be best to just work with them on coming up with a license that would basically meet our needs, but as well as let the OSI help drive the formulation of a new license. So, if it's consistent and principal to what SSPL is, we will end up potentially adopting that new license. I should note that we've already seen a number of other vendors come out with their own licenses that are somewhat consistent with the spirit of SSPL. I think just dealing with the challenges of building open source business in the cloud era. And so, I expect this trend to continue. And in terms of our discussions with other people, for customers, it's been a complete non-event. Our partners have been very supportive. And we feel very good about the defensibility of our IP.

Great, thank you.

And the next question comes from Rishi Jaluria.

Hi, guys. This is Hannah on for Rishi. Thank you for taking my questions. Just starting off, I know, last quarter, you were talking about adding sales capacity in the field and growing the self-serve business. And I was just wondering if you could give an update on that and any new initiatives you've [indiscernible] on that.

Yeah. So, we are definitely trying to add a lot of sales capacity. We're actively recruiting in all theaters around the world. We've added leadership capacity, which is a precursor to adding field capacity. And we're spending a lot of time, not just on recruiting, but also on the on-boarding program, so our new reps can – the ramp to productivity is as short as possible. We're spending a lot of time on training and other development activities, not just for reps, but also for our leadership. And in terms of self-serve, that's also a big push. There's a lot of focus on our self-serve business. We've added a number of resources to that team. It's a big part of the senior management's attention and focus. And you'll expect us to add more capacity in that group. And as I mentioned in my prepared remarks, Archana Agarwal, who's going to be joining our board in August, she ran and built the self-serve capabilities at Atlassian. And the reason her experience is very relevant because that was a developer-focused product. Their business is predominantly self-serve, and so her experience – and she has, obviously, worked in a very high growth, rapid growth environment. So, that experience will be very relevant to what we're doing here and we're excited to get her assistance and counsel as we scale our business.

Okay, great. That's really helpful. And then, second, I was wondering if you had any commentary around churn you're seeing from the mLab customers?

Yeah. So, what we've talked about is it's less about churn as we gave our forecast and our guidance, but it's more about sort of price compression as resulting of the fact that we offer different pricing plans and our philosophy has been to be customer-friendly. And if they had a lower plan previously, they will get the benefit of lower plan. And if the Atlas plan represents a price reduction, they will get the benefit of the Atlas price reduction. And so far, the integration has gone smoothly. We're only a couple of quarters into it and most of the migrations will take place in the latter half of this year. And so, I don't think there's anything material to report there. But so far, we've been very pleased with how things have gone and the performance of mLab and the integration steps that we've made over these first two quarters.

Okay, thank you.

Thank you. And that does conclude today's question-and-answer session. I'll now turn the conference back over to Dev Ittycheria for any additional or closing remarks.

In summary, we are really pleased with the start to fiscal 2020 with our Q1 performance. We believe the investments we're making in both the product and go-to-market areas are yielding high returns and we're really excited about the future. And so, we thank you for your time and we hope to see many of you at MongoDB World in New York City on June 18th, 2019. Thank you.

Thank you.

Well, thank you. That does conclude today's conference. We do thank you for your participation. Have a wonderful day.