MongoDB, Inc. (MDB) Q1 2022 Earnings Report, Transcript and Summary

Good day, and welcome to the MongoDB First Quarter Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Brian Denyeau from ICR. Please go ahead, sir.

Great. Thank you, Chuck. Good afternoon, and thank you for joining us today to review MongoDB’s first quarter fiscal 2022 financial results, which we announced in our press release issued after the close of the market today. Joining me on the call today are Dev Ittycheria, President and CEO of MongoDB; and Michael Gordon, MongoDB’s COO and CFO. During this call, we will make forward-looking statements including statements related to our market and future growth opportunities, the benefits of our product platform, our competitive landscape, our financial guidance, our planned investments and anticipated impact of the COVID-19 pandemic on our business and results of operations as well as on our clients and the macroeconomic environment. These statements are subject to a variety of risks and uncertainties could cause actual results to differ materially from our expectations. For discussion of the material risks and uncertainties could affect our actual results, please refer to the risks described in our SEC filings, including our most recent annual report on Form 10-K. Any forward-looking statements made on this call reflect our views only as of today, and we undertake no obligation to update them. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release 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 thank you to everyone for joining us today. I will start by reviewing our first quarter results before giving you a company update. Looking quickly at our first quarter financial results, we generated revenue of $181.6 million, a 39% year-over-year increase and above the high-end of our guidance. We grew subscription revenue 40% year-over-year. Atlas revenue grew 73% year-over-year and now represents 51% of revenue and we had another strong quarter of customer growth, ended the quarter with over 26,800 customers. June marks the 5th anniversary of launching Atlas, our MongoDB database as a service offering. In Q1, Atlas reached a remarkable milestone, becoming the majority of revenue in just under 5 years. Deployed in over 80 regions around the world across AWS, Azure and GCP, Atlas is now in nearly $400 million revenue run rate business growing over 70% year-over-year. While we are proud of how quickly we have grown this business since its inception, we are confident that we've only scratched the surface of the opportunity ahead of us. As we look back at the first five years of Atlas, we see a story of innovation, aggressive investment and demonstrate ability to take smart risks, some of which seemed quite controversial at the time. We launched Atlas in June of 2016 as a self-serve only offering on AWS. Although in retrospect the decision to launch an independent database as a service business seemed like a no brainer. It wasn't obvious at the time, there was a fair amount of skepticism in the market, that an independent company could build a successful cloud service, while both partnering and competing with the hyperscale cloud vendors. A year later, we launched Atlas on Azure and GCP. Even though it was more work and added more expense to support all three cloud providers, we made this a priority as you understood from the outset that as the cloud became mainstream, customers would want a multi cloud solution. Due to the strong initial reception of Atlas in our direct sales channel, we invested aggressively to achieve feature parity between enterprise advanced and Atlas. We reached that milestone in mid 2018 ahead of our original schedule, and since then have led with innovation on Atlas. Our ability to quickly ship new features and get customer feedback has not only allowed us to innovate faster, but has also benefited our enterprise advance customers. From an outsider's perspective, one of the more controversial decisions we made was to change our license from AGPL to SSPL in 2018. Our objective was to remain true to our open source roots, while ensuring that you could build a meaningful database as a service business in the cloud era. While some suggested this will limit the adoption of MongoDB, we had conviction that we could better serve customers with this change. MongoDB's popularity with developers has only continued to grow after adopting SSPL. Given the success of Atlas, a number of open source companies have now switched to similar license structures. Around the same time we acquired mLab, which not only increased our scale in the cloud, but also increased our expertise in the self-serve channel. We uncovered a virtuous cycle between our field sales organization, our inside sales team, our customer success organization and our self-serve channel. Investments in any one area lead to the acceleration for the entire cycle. And this virtuous cycle has been a key enabler of our growth. To give you some context, the majority of Atlas revenue was originally sourced by our self-serve channel, but the majority of growth has come through the direct sales channel. In 2019, we acquired Realm, the world's leading independent mobile database, and now beta versions of Atlas search and Atlas data like. With these actions, we took the first steps to move from offering a database to becoming a comprehensive application data platform. Our expanded product vision was driven by a customer's desire to leverage MongoDB more broadly across their organization. In 2020, we continue to make changes that made it easier for customers to start using Atlas. These changes resulted in a big uptick in new customers, resulting over 25,000 customers of almost every size, and from nearly every geography and industry using Atlas today. Looking back at the first 5 years of Atlas, we see a few key lessons learned. First, while innovation, strong execution and unconventional thinking contributed to the growth of Atlas. None of this would have been possible without MongoDB's outstanding product market fit and a massive market, which is estimated by IDC to be 73 billion in 2021. With 175 million cumulative downloads, which over 70 million were in the last 12 months. MongoDB continues to be the world's most popular modern general purpose database. The popularity of MongoDB is the foundational pillar for the success of Atlas. Second, given the choice, customers would rather focus resources on building new applications and shipping new features quickly than spend time and resources on the undifferentiated heavy lifting of managing their distributed application data infrastructure. Third, multi cloud is proving to be even more important than we originally imagined. Customers have experienced firsthand that cloud providers do have outages. So building resilience across cloud providers is critical for many customers. Moreover, as cloud providers differentiate among themselves, being able to leverage different services from different cloud providers is something customers want to do. Finally, customers value solutions that make it easy to move from one cloud provider to another, reducing lock in with any one cloud vendor. As we look to the future, there are a number of reasons why you are bullish about our long-term prospects. First, we are seeing increased adoption, enterprise adoption of Atlas. In the first quarter, approximately two-thirds of new business one by our field sales team was Atlas, more than double the percentage from 2 years ago. Not only our customers choosing more of Atlas, they’re building or moving mission critical workloads onto Atlas, which is the biggest driver of growth of our more than 1006 figure customers. Second, cloud partners are recognizing the value that MongoDB and Atlas bring to their own businesses. Using Q1 as an example, we had a record co-sell quarter with AWS, GCP and Alibaba. We are seeing increasing opportunities to expand ways we partner with cloud providers through both technical integrations as well as go-to-market initiatives to enable more customers around the world to derive the benefits of using MongoDB. Finally, our C level customer conversations indicate that our application data platform strategy is clearly resonating in the marketplace. Customers increasingly tell us that they prefer to standardize on a general purpose platform, rather than use a myriad of single function databases that add more cost and increase the complexity of running workloads in the cloud. Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the first quarter. Commerce tools the leading next generation eCommerce platform, selected Atlas to power the world's most popular ecommerce sites used by over 200 leading global brands such as Audi, AT&T and Tiffany, commerce tools is now able to scale as platform and flexible API first approach to support the world's biggest retailers so they can design unique and seamless shopping experiences across all digital touch points. At the beginning of May, MongoDB and commerce tools help one of the world's largest toy companies launch a massive and highly anticipated campaign to millions of fans across the world without a hitch, UI Path, a leading enterprise automation software company offering an end-to-end automation platform that combines robotic process automation with a full suite of capabilities. To enable organizations to rapidly scale digital businesses -- business operations chose MongoDB as their underlying data persistence platform to increase efficiency for developers and accelerate time to market with new features and functionality. Leading provider of cloud based compliance solutions, Avalara is migrating from SQL server to MongoDB to support its complex data requirements, with more than 30,000 customers 95 countries, the company needs a database to keep up with billions of transactions as it rapidly scale this platform to support new industries, geographies and compliance services. One of the largest grocery chains in the world chose Atlas to strengthen its digital portfolio and scale its services across the eCommerce platform and in store offerings. The company which has more than 2,000 stores selected MongoDB to replace Cosmos DB after searching for a scalable solution with a flexible data model that will give us developers a richer feature set and better visibility to their data. Capital created by leading Japanese intercompany CyberAgent is a dating application with over 6 million registered users. The app which has made over 200 million matches since inception was deployed in Atlas for ease of use the capacity store 7.5 billion documents and the ability to upgrade very large clusters, while scaling to accommodate large user growth. In summary, we're off to a strong start in fiscal '22. With that, I'll turn it over to Michael.

Thanks, Dev. As mentioned, we delivered another strong performance in the first quarter both financially and operationally. I will begin with a detailed review of our first quarter results, and then finish with our outlook for the second quarter and full fiscal year 2022. First, I'll start with our first quarter results. Total revenue in the quarter was $181.6 million, up 39% year-over-year. Subscription revenue was $174.6 million, up 40% year-over-year and professional services revenue was $7.1 million, up 29% year-over-year. Overall Atlases strong performance continues to be the largest contributor to our growth. Atlas grew 73% in the quarter compared to the previous year, and now represents 51% of total revenue compared to 42% in the first quarter of fiscal 2021 and 49% last quarter. As David discussed Atlases continued strong growth at increasing scale, reflected strong product market fit, our large market opportunity and the clear market shift among customers of all sizes towards a fully managed cloud database offering. Given that Atlas is now the majority of our revenue, and that we continue to expect it to grow as a percent of revenue. I thought it would be helpful to remind everyone how Atlas impacts are reported financials. First, Atlas revenue is recorded on a consumption basis and therefore varies with usage. Whereas enterprise advance include a term license component that is recognized upfront. So for a comparable dollar size contract, both enterprise and advanced Atlas will recognize the same amount of revenue over the contract term, but the Atlas contract will generate less initial revenue. Second, so self-serve Atlas customers and a growing portion of our direct sales Atlas customers do not pay us annually upfront, as is customary for enterprise advanced customers. We believe that payment and commitment flexibility facilitate outlets adoption and usage, which will ultimately maximize long-term revenues and cash flows. However, as a result, Atlas generates less deferred revenue and less upfront cash than enterprise advance. To illustrate this point, as of Q1, nearly 40% of our total ARR had little or no impact on our deferred revenue. Finally, Atlas has a lower overall gross margin the enterprise advanced because of its infrastructure component. That said, we've significantly reduced the margin difference between the two as Atlas is scaled. In addition, on an apples to Apple's functionality basis, Atlas is a creative dollars of gross profit. As a reminder, we do not try to influence which of our products customers choose. What we really care about is customers adopting and expanding their use of MongoDB. We're happy to have customers run MongoDB in whatever way best suits their IT strategy. And we expected enterprise advance will continue to grow, especially in regulated industries such as financial services and healthcare that are moving to the cloud at a more measured pace. During the first quarter, we grow our customer base by over 2,000 customers sequentially, bringing our total customer count to over 26,800 customers, which is up from over 18,400 in the year ago period. Of our total customer count, over 3,300 are direct sales customers, which compares to over 2,200 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 established a direct sales relationship. The growth of our total customer count is being driven in large part by Atlas, which have over 25,300 customers at the end of the quarter compared to over 16,800 in the year ago period. It is important to keep in mind that growth in our Atlas customer count reflects new customers to MongoDB. In addition to existing enterprise advanced customers adding incremental Atlas workloads, We had another quarter with our net air expansion rate above 120%. We ended the quarter with 1,057 customers with at least $100,000 in ARR and annualized MRR, which is up from 780 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 P&L, I'll be discussing our results on a non-GAAP basis unless otherwise noted. Gross profit in the first quarter was $131.6 million, represent a gross margin of 72%, which is consistent with last quarter and down from 73% in the year ago period. Overall, we are pleased that 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've had good success driving greater efficiency as Atlas scales to minimize the gross margin impact. We continue to expect that we'll see some modest reduction in overall company gross margin as Atlas continues to grow as a percent of total revenue. Our operating loss was $8.4 million and negative 5% operating margin for the first quarter compared to a negative 6% margin in the year ago period or outperformance or operating loss guidance was driven primarily by revenue outperformance. Net loss in the first quarter was $9.5 million or 0.15 a share based on $61.4 million weighted average shares outstanding. This compares to a loss of $7.3 million or $0.13 a share on $57.6 million weighted average shares outstanding in the year ago period. Turning to the balance sheet and cash flow. We ended the quarter with $935.6 million and cash, cash equivalents short-term investments and restricted cash. Operating cash flow in the first quarter was positive $10.2 million driven by strong collections following record q4 sales results after taking into consideration approximately $1.8 million in capital expenditures and principal repayments of finance lease liabilities. free cash flow was positive $8.4 million again the quarter. This compares to negative free cash flow of $8.5 million in the first quarter of fiscal 2021 Despite the stronger-than-expected Q1, we continue to expect that we will burn cash in full fiscal year 2022. As we continue to invest significantly in the business. I'd now like to turn to our outlook for the second quarter and full year fiscal 2022. For the second quarter, we expect revenue to be in the range of $180 million to $183 million. We expect non-GAAP loss from operations to be $24 million to $22 million and non-GAAP net loss per share to be in the range of $0.43 to $0.40. Based on 62.4 million weighted average shares outstanding. For the full fiscal year 2022, we now expect revenue to be in the range of $771 million to $784 million. For the full fiscal year 2022, we expect non-GAAP loss from operations to be $76 million to $68 million and non-GAAP net loss per share to be in the range of $1.38 to $1.25. Based on 62.6 million weighted average shares outstanding. To summarize, MongoDB delivered excellent first quarter results. We are driving high levels of growth at scale, driven by our exceptional product market fit and customers demand for a modern application data platform. We continue investing to capture the large opportunity ahead of us. We're seeing attractive returns on those investments and are excited about our positioning for the future. With that, we'd like to open it up to questions. Operator?

[Operator Instructions] And the first question will come from Sanjit Singh with Morgan Stanley. Please go ahead.

Thank you for taking the questions. Actually wanted to start with a pretty high level question, just given on the traction that you're seeing what that was in the cloud. And also in terms of the customer counts. Dev, do you have a goal in mind in terms of where MongoDB can get to? I mean, is 100,000 customers possible if you look at some of the modern software companies, I think it's last year it was like north of 200,000, a Datadog, which is a little bit younger company than you guys are sort of getting 15,000 to 20,000 -- [indiscernible] at 20,000? What do you think from a customer base perspective MongoDB can ultimately get to?

Yes, as we said many, many times, we're going after one of the largest markets in enterprise software. And while obviously most of the dollars per customer are in the time of the can what I call the global 2,000. So obviously, there's only 2,000 of those customers. There's a massive opportunity to grow the long tail. And so while I don't want to speculate on what the high-end of the number could be, I think that number could easily be a lot higher than this today. And potentially even six figures, but at this point, we're not constrained by market, it's more about our operational capability and how quickly we can scale the business.

Got it. And then as a follow-up, if we sort of get your latest views on the demand environment. As we come out of pandemic, you guys did a really good job more or less sustaining growth in the back half of last year, given what you're seeing in terms of new projects than digital more applications being rolled out. Is there a potential for growth to accelerate coming in the back half? Or is it more of a sustained growth framework on that you're thinking about as we go into the rest of [indiscernible]?

As Michael noted, we are raising our guidance for the year. So we feel pretty good about the demand environment. We think that as customers recognize their need to be digital first, due to the pandemic, it's not like they're going to suddenly say, well, I'm going to go back to my more costly and more inefficient distribution channels, I think they're going to recognize that having a strong digital presence is critical to growing their business. And when they step back and think about how they drive their business, every company is not thinking about using software and data as a competitive advantage. That means every company is thinking about how can they drive the productivity of sales force developers, and every company is thinking about, how can I -- I can't buy my competitive advantage, I got to build it. And so I think that positions us well for the future as people as customers and organizations come out of the pandemic.

Excellent. Appreciate the thought, Dev.

Thanks, Sanjit.

The next question will come from Raimo Lenschow with Barclays. Please go ahead.

And congratulations from me as well. Amazing quarter. First question, I had two questions. One was on the relationship between EA and direct. If I look at this quarter that we'd like, lots and lots of momentum around direct, while EA is like kind of like, a little bit in the background. Is that kind of way how you see it as well playing out in the future? So in other words, have customers kind of fully realized they should be in the cloud and that's kind of the path forward? Or is there kind of a delay effect of EA potentially coming back a little bit more in the second half of the year and the next year? And then second question is on self-service.. And as we are coming out of the pandemic, do you think self-service will start picking up again, as kind of developers have a little bit more money? Or is it all going to be direct going forward? Thank you.

Thanks, Raimo. So on the first part of your question about the relationship between our sales force and EA, I would just tell you that we are not prescriptive about what products to sell to customers. We basically want to serve the customers the best way that they want to be served. And so for some customers that they still have a very measured approach to moving to the cloud, others are going much more aggressively to the cloud. And we obviously have offerings for both sets of customers. I will tell you that we clearly see the high-end of the market getting very, very comfortable moving mission critical workloads to the cloud, and in particular to obviously to Atlas. And so one of the comments I made in the prepared remarks is that the majority of our six figure customers are now -- those are Atlas only accounts. And so that tells you a lot about the sophistication of our customers who are using Atlas at the high-end. And again, I think there's always going to be some seasonality that mix between Atlas and EA and we are still believers that EA is going to grow healthily over the long-term. And then with regards to self-service, self-service is a very, very important channel. One of the things I -- one of the comments I made in the prepared remarks was to basically explain that the majority of source revenue for Atlas came from the self-serve channel, not just customers, but revenue. Now the majority of the growth came from our sales force. So self-serve is a very healthy part of our business. And we see a nice flywheel effect between self-serve and direct sales. And so I don't want you to think that because what you -- when you look at the numbers, think like the self-serve business is not growing. What happens is that our sales force is now very adept at basically picking off the highest quality self-serve accounts and growing those accounts that much more quickly. So the self-serve channel is paying huge dividends for us. And we're investing in all parts of the business.

Okay, perfect. Thank you and congrats.

The next question will come from David Hynes with Canaccord. Please go ahead.

Hey, thanks, guys. Great set of numbers here. Michael, I'm going to start with you. I feel silly asking this coming off of a 73% growth quarter. And I know it's clearly not contemplated in the guide. But it's possible that Atlas could accelerate further from here as we lap quarters a year ago, where expansion was coming under pressure during COVID.

Yes. Thanks for the question. So when I think about it, I would go back to what Dev said. We really think about the business from a channel basis. And I think that this is important to sort of underscore, especially for people who haven't been following the story closely. And so when you think about the channel, we've got the self-serve channel, which is almost entirely Atlas, and has [indiscernible], and we've got a bunch of disclosure around that. And then there's the direct sales channel. Direct sales channel, really you can think of as having two main components, sort of a midmarket component, and then a field component, higher enterprise component. What we've seen is that midmarket component is also almost entirely Atlas. And one of the biggest factors when you think about what will the Atlas trajectory look like, over time is how rapidly does the field enterprise channel adopt public cloud, right, and we sort of said for a while, that's the biggest swing factor overall in terms of the Atlas numbers. Clearly, you can see in the mix of results from Q1, in some of the vignettes that Dev shared in terms of the narrative, it was a very strong quarter for Atlas, when you look at the mix of deals in the enterprise channel, roughly two thirds of the new business was coming from Atlas, which is a very significant kind of high watermark. And so that has impact as we talked about in terms of the financials in terms of not having term license revenue and other things like that sort of factors in to the rest of the year. And so I think that's how we have to think about it. It's really ultimately will depend on what your assumption is around that. We do think over the long-term it will trend, but really in Q1 is more of a mix of deals issue.

Yes, yes. Okay. That's helpful color. And then Dev, the follow-up. As we think about the introduction of new functionality over time and how you take that to market, do you think there are capabilities that may come in the form of new SKUs? Or should we expect the innovation to be more aimed at kind of differentiating the core offering? I think of like [indiscernible] search and what you did there. Just trying to think about kind of the longer term monetization of R&D efforts.

Yes, so that's a great question, David. What I would tell you is today, our focus is really about innovating at the core. And then our new products are all about finding new ways to acquire new customers, and as well as expanding the lifetime value of our existing customers. And so today, the revenue does show up mainly in Atlas versus separate SKU, but you should not assume that that'll be the case long-term. We have a pretty aggressive innovative agenda -- innovation agenda. And so, over time you'll see us add more products and more SKUs.

Yes, very helpful. Thanks, guys. Congrats.

Thank you.

The next question will come from Brad Reback with Stifel. Please go ahead.

Great. Thanks very much. Dev, from a high level, is there any way to know how much of what your customers are spending with you is net new budget versus what's being reallocated from legacy relational databases?

Well, I would say that, as companies recognize that at the heart of their value proposition is how effectively they use software and data, I have to believe that their investments in building software applications is growing over time. Now, we believe that applications have a certain lifespan, depending on the application could be as short as 3, 4 years. It could be as long as 15, 20 years. And so applications have a natural retirement rate. Now there could be situations where applications are just not serving the business or the end users effectively. And so people may decide that there's some changes that need to be made more quickly. And so it's hard for us to suss out all the time, like all these net new budgets versus existing budgets. What we recognize is that we have to make a compelling business case. And so our sales organization is quite adept at just making sure that as -- whenever you get a six figure deal, someone's got to justify that expenditure. It's just no one's is going to hand someone a six figure check. And so that either is about advancing the business forward or reducing costs and existing infrastructure, what have you. And so we typically ensure that our -- that we've built a compelling business case for customer decide to choose MongoDB. And so the business case is compelling. There'll be dolls available, even if it's stealing [indiscernible] from existing budgets.

Yes, I would say add, Brad, so away from budget because that's a little bit hard for us to have perfect visibility on. We have pretty consistently seen that about a quarter of the enterprise advance wins are relational migrations, that number is lower on Atlas, because Atlas tends to be new applications as people are adopting the cloud. But that's been a pretty consistent number that we've seen.

Great. Thanks very much.

Thanks, Brad.

The next question will come from Brent Bracelin with Piper Sandler. Please go ahead.

Good afternoon and thanks for taking the question here. Dev, I wanted to drill down into kind of this 5-year anniversary of Atlas. Clearly you’re messaging kind of a milestone shift and enterprise interest in the platform. Could you talk a little bit about maybe the number of $100,000 Atlas customers, are you seeing any $1 million plus Atlas customers yet? Clearly, it sounds like it's starting to really resonate with enterprises. But any additional color you could talk about relative to the size of some of these Atlas enterprise deployments would be helpful. And then one quick follow-up for Mike.

Sure. The six figure related customer count grew quite handily from last quarter to this quarter and a big driver of that was Atlas. And so we see a number of not only six figure customers on Atlas, but we also see quite a large number of seven figure customers in Atlas. So you should be -- there should be no misunderstanding. People are building and deploying very sophisticated complex mission critical workloads on Atlas. And Atlas has really proven just by the ubiquity of its reach. We're in over 80 regions around the world. So we are by definition, because you run across AWS, Azure and GCP, we're the most widely -- geographically widely available database as a service offering in the market. Some of the capabilities we recently introduced like global clusters, so customers can run the same workload across two different cloud providers, something no one else can do. And there's a whole bunch of other capabilities around data partitioning, privacy and security that not many people can do. So people run very, very sophisticated workloads on Atlas. And I think you're seeing the results of the enterprise, and the high-end of the market recognizing that and more workloads moving on to Atlas.

And Brent, Dev, sort of alluded to this, but just to give you the stats, so it's clear for everyone. 60% -- roughly 60% of our customers at that $100,000 or greater mark, have Atlas spend above that level, right. So that doesn't mean that they have only Atlas spend, they may have Atlas NDA, but 60% of the customers over that $100,000 threshold have Atlas spend that would qualify them alone for above that level.

[Technical difficulty] for you on -- I believe yet you're talking about record partner revenue contribution, I think it was from Alibaba, was that just MongoDB as a service? Was it predominantly Alibaba? Were there other MongoDB as a service partners there? Just clarify what that record was and what you're referencing relative to kind of the strength you saw on Alibaba and others in the quarter?

Yes. We saw a huge increase in joint wins with -- to be clear, not just with Alibaba, but with Amazon and GCP as well. And with Alibaba, it is not Atlas, because due to the regulatory environment in China, we cannot offer Atlas directly. So we partner with both Alibaba and Tencent. We started with Alibaba first. And what we have done is repurpose some of our local sales team in China to really enable the Alibaba organization to more effectively position and articulate the value proposition of MongoDB. And that's we're seeing the results. They're getting impacted quite positively very, very. In the short timeframe, we've done that, so much so that even Alibaba is investing more and building a center of excellence around MongoDB. So we feel really good about what's happening with Alibaba. Tencent, we're in the early days. And our plan is to do the same there in terms of operationalizing their capabilities to sell MongoDB as a service to their customers as well.

Helpful color, and good to see them around here. Thank you.

Thank you, Brent.

The next question will come from Jason Adder with William Blair. Please go ahead.

Yes. Thank you. Dev, you talked about your portability value proposition. And I'm just wondering, have you seen any noticeable change from your customer base on how they're viewing databases from cloud providers like AWS and Azure, just in terms of that cloud lock in risk? And then does it differ by the size of customer? In other words, larger customers tend to be more worried about it. Any color there would be great.

Yes. So what I will tell you is that one of the compelling value props of MongoDB is you can run MongoDB anywhere. And what that really means is you don't have to rewrite one line of code, whether you run it in your own data center, you manage yourself in the cloud, or use it as a service across AWS, GCP or Azure. And so that becomes a pretty compelling value proposition because as we all know, business conditions change. Cloud providers are differentiating among themselves, offering price concessions or new capabilities that customers want to take advantage of. And what they don't want to do is be locked into any one environment. In terms of competition, we have been competing with offerings, clone offerings from Amazon and from Azure. And obviously, all the cloud providers do offer some types of database services. So there's also other competition available and our win rates against them is exceptionally high. The clones are compromised, because they're not built on the same architecture as MongoDB. They're built on relational back end. So they're compromised in terms of features and performance. And we will go toe to toe with any relational database, because we know the superiority of our architecture, the scalability of our platform and the ability for customers to move much more quickly on MongoDB versus any other solution. So we feel pretty good about the competitive environment today.

And a quick follow-up for Michael. Michael, the operating margin guidance for the year, does that assume that your expenses are going to be kind of back to normal as we come out of COVID?

Yes, we talked about in the March call was that we assumed a significant resumption of expenses that were not realized in the context of COVID mostly sort of office and travel related. And I think we'd quantified those in the back half of the year, roughly $20 million to $25 million. And so see no reason for change on that based on kind of the global situation related to the pandemic.

Great. Thank you guys.

The next question will come from Kash Rangan with Goldman Sachs. Please go ahead.

Hi, Kash. Operator, we might …

Perhaps you have been muted, sir. And the next question will come from Karl Keirstead with UBS. Please go ahead.

Oh, thank you. Maybe one for Dev, one for Michael. Dev, I'm just wondering if you could comment on the pace at which the firm was able to add quota carrying reps during the quarter and whether the performance during the quarter has changed your hiring plans for the full year. And then maybe, Michael, when you were providing Q1 guidance 3 months ago, you did mention that I think it was on the EA side of rev rec 606 related issue that might cause subscription revs to be down sequentially. It clearly wasn't, but I'm wondering if whether that issue that was on your mind transpired and was simply offset by goodness elsewhere? Maybe you could comment on that. Thanks so much.

Karl, I'll take the first question regarding the pace of hiring. We're trying to hire salespeople as fast as possible. The main reason being we're going after a really big market. And, frankly, in enterprise sales, you have to show up to win, right. And so we know when we go head to head against the competitors for the last question asked that our win rates are exceptionally high. But you do have to show up to win. And there's many areas of the world that we're really under penetrated. And so we want to hire salespeople to make sure that we can go after those opportunities, but it's not just simply as hiring like 500,000 salespeople in one quarter. You have to make sure you have the right supporting infrastructure in place in terms of sales management, pre-sales technical skills, the right enablement, sufficient ramp time, etcetera. So there's a whole operation that we have to kind of make sure that we have the right support structure to make those salespeople successful. But we're being very aggressive in terms of hiring salespeople as fast as possible. Michael, I think the second question was for you.

Yes. So on the variability, we will see variability quarter-to-quarter based on the mix of deals and that does have revenue implications given the term license component under 606 for enterprise advance. I would generally characterize the quarter as good for both EA and Atlas. EA had a particularly difficult compare given the lumpiness of the term license recognition in the base period. But generally it was a strong quarter on both products and on EA was a particularly good quarter on relational migrations.

Got it. Okay, helpful. Thank you both.

Thanks, Karl.

The next question will come from Tyler Radke with Citi. Please go ahead.

Thanks for taking my question. It looks like you're starting to see a lot more success selling Atlas directly into your large customers. And Dev, I think you referenced a Cosmos DB deal that you display. So I'm curious kind of how the competitive landscape may differ relative to EA when you are selling those Atlas deals to large enterprises? Do you find you're displacing a cloud native solution. And if so, kind of curious who you're running into most frequently?

Well, obviously, you have to remember that if someone's going to choose Atlas, by definition, they've already chosen MongoDB because Atlas is the -- obviously the service offering that underlies MongoDB. What I will tell you is actually this is that one of the real advantages of MongoDB is the ability to scale your application through something that's called sharding. When customers try and do that themselves on their own premise, we find that some customers get intimidated by the fact that they can -- how quickly they can scale the environment, or they may not have sufficient compute capacity to scale their environment as quickly as they want. When you move to the cloud and by definition, you now have elastic capacity, it becomes much easier to leverage the power of MongoDB in a cloud world. The distributed capabilities, the ability to easily shard data, the ability to use capabilities to partition data, whether it's for privacy and security regulations around data in different parts of the world, or whether it's for performance, moving some data closer to end -- some end users in different parts of the world, all this capabilities gets far better exposed in Atlas than someone trying to do that in their own data centers. So that's the added benefit of customers -- the customers see by running these mission critical workloads on Atlas.

Great. And a follow-up maybe for Michael or you Dev. So during the pandemic, you obviously invested pretty aggressively in sales headcount. I think, in the first half of last year, sales and marketing headcount grew close to 60%. I'm curious just how the ramp of those reps have gone. Obviously, it's probably a lot different getting those folks up and running in a remote environment. But maybe if you could just comment on the ramp time of those sales reps and kind of the percentage of your sales reps that are fully ramped at this point.

Yes. So what I will tell you is that we recognized very early on that once everyone's working in this virtual world, one of the biggest -- the one of the most -- typically one of the most fragile parts of any sales organization is your new reps, those reps for ramping. I haven't closed any business and they're obviously nervous about putting up numbers on the scoreboard. We went on our way to really ensure that we provided the right level of enablement, the right level support, and so on so forth to help those reps ramp as quickly as possible. And in general, the ramping of the new reps is in line with our expectations. And we're putting a lot of focus there. We do it actually for employees across all functions, not just sales. But we have a particular focus on salespeople, because by definition, we need them to produce in a certain timeframe. And so there's a lot of focus on making sure that our reps are ramping. We have different levels of training from boot camps, advanced sales training, to specialized product training to ongoing product updates as well as a lot of inspection by sales leadership in terms of their activity and the quality of their pipeline, and so on so forth. So we have a lot of measures in place to ensure that we can really track is a sales rep ramping appropriately given their time and tenure in the field. The same -- we do the same thing for our inside salespeople. We assume obviously a short ramp for inside salespeople. But in general, we've really instrumented our sales process to identify where people may be at risk and put in remediation of the programs in place as soon as possible.

Yes, the only other thing I'd add, Tyler is we're consistently looking to expand the sales force to Dev's earlier comments given how thin our footprint coverage is, relative to the magnitude of our market opportunity. And we tend to be operationally constrained in terms of how much we can add. Obviously, if there are [indiscernible] locations, pandemic or otherwise, where we can incrementally or opportunistically add even faster, we will go do that. But that's been sort of a long and I think will be a long focus area, given the magnitude of our opportunity.

Thank you.

[Operator Instructions] Our next question will come from Jack Andrews with Needham. Please go ahead.

Thanks and congratulations on the results. Dev, I was wondering if you could provide an update in terms of how the global size might be helping you. You've talked in the past that a number of them have been building MongoDB practices. So could you maybe frame for us, is there -- what proportion of deals that they might be factoring in today? And I'm also just wondering, are they helping you to gain access to more of these C level conversations you're having over time?

Right. So there's a quite a synergistic relationship between MongoDB and the SIs because in many cases, the SIs act as either the company's development arm or augment their existing development organization. So by definition, they're the developers of the applications and they're the ones using MongoDB to build those applications. The SIs are also building cloud migration factories. Their practices in that area to help customers migrate workloads from on-premise to the cloud. And so, so we're involved working with a number of large size people like Accenture, TCS, Cap gems -- Capgemini, Infosys, etcetera. Working with them, they have different programs by organization. Essentially has their a MongoDB accelerator program, the Capgemini and TCS have different programs focused on different verticals. We also work with, frankly, some boutique asides, who have expertise, deep expertise in MongoDB, or perhaps deep expertise in mobile or deep expertise, in particular vertical or particular geography. And so we work with boutique SIs as well, if the situation warrant. So, I would say in general the SIs are that business overall is growing, but there's plenty more to do. And one of the challenges of working with these larger sides is that they're very decentralized. So even though you may have success in one geography or even one account doesn't mean that translates very, very quickly across the entire organization. But as we get more credibility as we are more wins as our reputation gets stronger, we're seeing these SIs come to us to work with us and more and more opportunities.

First, great. Thanks for the color.

Thank you.

The next question will come from Fred Havemeyer with Macquarie. Please go ahead.

Okay. Thank you, Dev. Similar to the SI question with the pan [ph] on ISVs, could you give an update on how your ISV ecosystem is progressing? And then also how you're seeing MongoDB adoption among ISV is trending between adoption of either Atlas or other offerings?

Well, in the prepared remarks you talked about commerce tools, which is just nice to be really helping retailers and so we're having a lot of success with them. There's a number of other ISVs that we work with. We, in fact, have a dedicated sales team now that's pursuing ISVs. And it's really a two step sales process. One is a sell two [ph] process where we get the -- either the CTO, the CEO, or like the Chief Product officer, or their teams to think about building their new version of their product or re-platform existing product off a legacy database onto MongoDB. And then the second step is then working with them to go close their first set of customers, and then we're the beneficiary of their growth. So that there's a team that's dedicated on doing that. And I don't have our IC count in front of me, but it's numbers in the hundreds. And that's a big opportunity for us. And you're going to see us put more focus, time and resources, serving ISVs.

Thank you. And then just a follow-up. So during the prepared remarks, you also mentioned about how UiPath is using MongoDB for its persistence layer. And I'd like to dig into that a little bit more depth here. We've seen tech companies talking about low code, no code a lot recently. Something like a 1,000%, more than last year when they last measured it. And we certainly picked up on low code and no code company using MongoDB in addition to what UiPath is doing. Can you talk to us about why you think or why you're seeing the low code and no code vendors choosing your database. And generally what that means for your overall organization, go to market as the platform is kind of catch on or wrap up.

Yes, it's, I would say, in general, we see ISVs. And obviously, there's a segment of them being low code or no code, vendors are using who choosing MongoDB. One because of the data model. The document data model, we would argue quite convincingly I would add is that is the best way to work with data. The flexibility of the data model allows you to really manage data the way developers think in code. Also allows you to make changes very, very easily. So if you talk to anyone who's worked with relational databases, by the time the application gets past rev 1, or rev 2, the data model gets very brittle. And it becomes much harder to make ongoing changes. You do not have that problem with MongoDB. The second point is that MongoDB is by definition, the most distributed and scalable platform available. It was built from the ground up to be a distributed data platform. And so ISVs really appreciate that because they serve a myriad of customers. And so they want a platform that can scale. And the third thing is that the MongoDB can run anywhere. It's not a cloud only platform, it's not an on-premise only platform. So depending on the ISVs business model, they can deploy it as ShrinkWrap software. They can offer it as a service in the cloud, or anything in between. And so MongoDB enables them to maintain a whole host of options. And that's why I think you see ISVs choosing MongoDB.

Thank you.

The next question will come from Kash Rangan with Goldman Sachs. Please go ahead.

Thank you very much. Congratulations on a wonderful quarter, and especially the cloud traction you're getting. Dev, I wanted to just get your perspective on incrementally speaking, as the economy opens up, you've been very successfully operating and producing results in a virtual setting. As we open up, what are the incremental opportunities that MongoDB can take advantage of, that you couldn't with the virtual setting during the pandemic. Thank you so much once again.

Thanks, Kash. I think we said this last year, and we said I think even more most recently in the last quarter. While we've done well, during the pandemic, we do believe that COVID has been a slight headwind to our business. We know that there's still an enormous amount of deal scrutiny, especially on big deals. We know that approvals still take a long time to get done. We know that if customers are worried about the health of their business, there'll be cautious about making investments in their business with new technology. So as the world opens up, we believe that people will have even more confidence and more conviction in using MongoDB. And we think we're well-positioned because what the pandemic did tell us is that those companies who are adept at using software and data thrive because everyone have to become digital first. And so proficiency and using the software and data and I've said in the past, you can't buy your competitive advantage, you have to build it yourself. And so that means you need to be very proficient in building applications that truly transform your business, adding features quickly, being able to respond to new opportunities and new threats. And so MongoDB is a great platform for enabling you to do that in a very flexible and scalable way. So we think we're well-positioned as the world opens up, and people run the business, leveraging software and data.

Wonderful. Thank you so much. Congrats again.

Thanks, Kash.

The next question will come from Pat Walravens with JMP Securities. Please go ahead.

Thank you so much. This is Joey Marincek on for Pat. Just one from us. It's great to see the momentum you're having with the cloud providers. But I'm just curious, how do you think about the pace of adoption and penetration you can achieve in international markets [technical difficulty] seeing with Alibaba, a partnership with [technical difficulty] and cloud partnerships that you announced as well are both based outside the U.S. Thank you.

Yes, So, I just want to make it clear. Atlas is available in 80 regions around the world. It's not just domestic offerings. So we leverage the points of presence of AWS, GCP, and Azure all around the world. And so pretty much in almost every market except China. Atlas is available, with a few other exceptions. And so we have a very wide global reach. What we do recognize is that certain regional players have deep customer relationships, or in some cases like in China and other places like Russia, there may be regulatory issues where we can't offer Atlas directly. And so by definition, we have to partner with a local provider to enable customers to drive the benefits of MongoDB. So I would say our international presence is very strong. We have thousands of international customers. And we partner with other providers when we don't believe we can serve the entire market ourselves through Atlas. And we've done that with people like OVH in Europe, and the cloud provider in Korea and other places around the world. Any other questions?

And the next question will come from Matthew Broome with Mizuho Securities. Please go ahead.

Hi. Thanks very much. So, just in terms of your enterprise advanced customers, to what extent are you thinking about potentially promoting or accelerating the migration of those accounts to outlets where it makes sense to do so? And thus enable them to start receiving the benefits of database as a service.

Yes, so our philosophy is to enable customers to run MongoDB anywhere and it really depends on the customer's choice about where they want to run the workloads and why? And so for many reasons, customers are happy to self manage MongoDB themselves using enterprise advanced either managing those workloads in their own data center, or self managing those workloads in the cloud. And so we're not trying to convince every customer that Atlas is the right solution. We're not at all prescriptive about how customers choose MongoDB. We just want to make sure that the needs get -- gets served the best way they see fit. And Atlas obviously has been a great boon to our business in terms of the growth and our ability to innovate on Atlas, being a cloud service is that much easier, because we can ship features more quickly. And we can get feedback more quickly. And those the benefits of that innovation then get driven to our EA [ph] customer. So EA customers also benefit from the innovations from Atlas.

Yes, we just add, given that we are effectively sales capacity constrained, it is much better to have the sales folks be paying attention to winning new workloads, rather than taking an existing workload that we've already won, moving it from EA to Atlas, unless it's important to the customer and their IT strategy.

Okay, I, see. Thanks. And then on -- just as Atlas continues to scale, to what extent do you expect to be able to drive some upsides of gross margins via sort of negotiating better economics with your hyperscale cloud partners?

Yes. So, I think we've continued to do that over the last several years. And certainly, if you'd ask me, at the time of the IPO, and so that was a big majority of the revenue where do you think gross margins will be I would have guessed a lower number. And so we've out executed relative to sort of the plan and the expectations. There still is a difference. We can't make the infrastructure component zero. So there will be a gross margin difference, but we have made good progress and will continue to turn the various efficiency in the optimization dials and levers that come across a number of flavors.

Perfect, thanks. Thanks very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Dev Ittycheria for any closing remarks. Please go ahead, sir.

Thank you, Chuck. I just want to again summarize that we're off to a strong start in fiscal '22. Again, with 39% year-over-year revenue growth driven by 73% growth in Atlas. We're seeing strong traction for Atlas in the enterprise channel as customers want a platform that enables them to innovate and scale quickly. And third, our application data platform strategy is resonating in the marketplace as customers see MongoDB's superior document data model as a viable solution for an increasing number of use cases. So we feel very good about the future. So thank you for everyone for joining us, and we'll talk to you next quarter. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.