Good evening. Thank you for attending today's MongoDB Fourth Quarter FY 2022 Earnings Call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Brian Denyeau, with ICR. Please go ahead.

Thank you, Selena. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter fiscal 2022 financial results, which we announced in our press issued after the close of the market today. Joining 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, customer behaviors, our financial guidance and our planned investments. These statements are subject to a variety of risks and uncertainties, including those related to ongoing COVID-19 pandemic and its impacts on our business, results of operations, clients and the macroeconomic environment that cause actual results to differ materially from our expectations. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks described in our SEC filings, including our most recent quarterly report on Form 10-Q. Any forward-looking statements made on this call reflect our views only as of today, and we undertake no obligation to update them. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release 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 fourth quarter results before giving you a broader company update. Looking quickly at our fourth quarter financial results, we generated revenue of $266 million, a 56% year-over-year increase and above the high-end of our guidance. Atlas revenue grew 85% year-over-year, representing 58% of revenue. We had another strong quarter of customer growth, ending the quarter with over 33,000 customers. The fourth quarter marked another major milestone as we crossed $1 billion in annualized revenue run rate. Crossing over the $1 billion mark five years after reaching the annualized $100 million mark is clear evidence of the value MongoDB's application data platform offers customers, large and small, all over the world. Our excellent fourth quarter performance was broad-based. We saw success in nearly every industry, geography and customer type. It was powered once again by the ongoing strength of Atlas. We also saw an uptick in sales for Enterprise Advanced, which speaks to the popularity of MongoDB, regardless of where our technology is deployed. Customer net additions remained robust, especially in our direct channel where Q4 marked a new record. It is expected that hundreds of millions of new applications will be developed over the next few years, as most organizations now recognize that a competitive advantage has to be built rather being blocked with off-the-shelf software. The core reason for our success is that in an era where there is an urgency to build compelling modern applications, MongoDB reduces the friction and cost of working with data, which is the biggest challenge developers face. However, the developer experience of working with data has become increasingly complex. The technologies and mechanisms of working with data have continued to get more fragmented as there has…

Thanks, Dev. As mentioned, we delivered another strong performance in the fourth quarter, both financially and operationally. I'll begin with a detailed review of our fourth quarter results and then finish with our outlook for the first quarter and full fiscal year 2023. First, I'll start with our fourth quarter results. Total revenue in the quarter was $266.5 million, up 56% year-over-year. Subscription revenue, $258.2 million, up 58% year-over-year and professional services revenue was $8.3 million, up 17% year-over-year. It was a very strong quarter across the board, and we exceeded our expectations for both Atlas and Enterprise Advanced. Overall, Atlas' strong performance continues to be the largest contributor to our growth. Atlas grew 85% in the quarter compared to the previous year and represents 58% of total revenue compared to 49% in the fourth quarter of fiscal 2021 and 58% last quarter. On a sequential basis, this quarter's strong Atlas revenue performance was driven in part by the exceptionally high in-quarter expansion of existing customers that we experienced and previously called out in Q3. Simply put, strong in-quarter expansion benefits, not just the revenue and the completed quarter, but also the revenue in the following quarter because the new quarter starts with a higher beginning run rate. In Q4, we experienced strong in-quarter expansion of existing customers that was in line with historical trends versus the exceptionally high growth rates we experienced in Q3. Enterprise Advanced had a particularly strong quarter. An important driver of the strength of EA is the success we are seeing in our large, high potential accounts. As a reminder, we provide incremental resources to some of our most promising customers in order to accelerate the adoption of MongoDB. A number of these high potential accounts are primarily using EA, and we had a strong…

Thank you. [Operator Instructions] The first question comes from Kash Rangan with Goldman Sachs. Please go ahead.

Congrats on the quarter. I just want to clarify the seasonality comment, Michael that you made with respect to Atlas. So we're merely talking about it sequentially only because Atlas is a much larger business today than it was exactly a year ago going into Q1, or are we actually calling out any structural changes in consumption that underlie that forecast? I also have a follow-up question. Thank you so much.

Yeah. So what we're talking about – and we called this out last year, is that Q1 for Atlas is seasonally lower because of the fewer calendar days in the quarter. It's a consumption-based model. And just obviously, you need days in order to consume and Q1 has fewer of those days. But the overall cohort behaviors as evidenced by the Q4 numbers are very strong, and we feel good about the underlying patterns.

Got it. So consumption as a structural change driver of your Atlas business is still less positive as you felt –

No change.

No change. Got it. Yeah. And one for Dev, when you look at the cohort of Atlas customers initial deployment steadily small, but then what are some of the bigger deployments on Atlas looking like that rival the more traditional on-prem deployments that give you the conviction that that some of the biggest database appointments on the planet could end up being completely cloud native and the prices two to three years from now? Thank you so much.

Yeah. Thanks, Kash. I would say just – I'd point to the seven-figure customers. The majority of those customers are on Atlas today. So we have large customers and actually even cutting-edge start-ups or running mission-critical workloads for start-ups is probably the entire business on Atlas for large customers, they're running mission-critical workloads. And so Atlas is not just for small workloads. We're seeing – and this has happened now for a number of years, we're seeing enterprises increasingly get comfortable with moving mission-critical workloads to the cloud. And one of the benefits of moving to MongoDB is that you get real optionality of not just starting on-prem and moving to the cloud, but going from one cloud provider to another. So we're seeing strong interest -- and I think we have the customer proof points to give people confidence to really move mission-critical workloads to Atlas.

Tremendous. Thank you so much.

Thank you.

Thank you, Kash. The next question comes from Sanjit Singh with Morgan Stanley. Please proceed.

Well. Thank you so much for the questions, and my congrats on another exceptional year. Dev, you mentioned that you went from $100 million to $1 in the [Technical difficulty]...

Hey, Sanjit? Hey Sanjit, we're having trouble hearing your question it's coming across very muffled.

I apologize, Dev. I think that was my headset. So question is essentially like as you scale beyond $1 billion, going from $1 billion to $2 billion, is there anything in the sort of how you go to market, how you organize the business change versus how you got to $1 billion? Typically, in prior sort of ramps of software companies, there's been a bit of a hiccup scaling past $1 billion. As this business crosses $1 billion, how do you feel about your ability to scale to $2 billion and beyond over time?

Sure. So we've constantly always tried to stay ahead of where the business is in terms of anticipating changes to our go-to-market model. I mean, as you can imagine, in the early days, we had one model, which is, a direct sales force really trying to sell to everyone. Then we introduced an inside sales team. Then we introduced self-serve. Then we've introduced the notion of having focused teams on high-end accounts. We introduced the notion of removing friction from the initial selling process to get customers on our platform more quickly. So we're always refining our go-to-market motion in anticipation of, one, how big this market is, and we try to meet customers where they are versus trying to force them to try to engage with us in one way. And you'll see us continue to do that. We're going to be focused -- increasing on verticalization. As I mentioned in the prepared remarks, we're seeing a lot of traction in key vertical industries. We're developing a deep degree of confidence around those industries. We've been having a team focused on solutions marketing for a number of years to particular industries. And you're going to see us organize our sales teams more overtime with a vertical orientation. You'll also see us going after what we call digital natives, which are kind of fast-growing mid-market customers who are building software and not just buying software. And they will obviously have a lot of value -- see a lot of value from MongoDB. So you can see us continue to push the envelope in terms of innovation. And I would argue that we have the best sales organization in enterprise software.

Well, plenty of opportunity ahead. So it sounds like, a lot to look forward to. Michael, on the guidance, you did a really great job of sort of contextualizing how you're approaching guidance this year versus last year, particularly on the element of COVID. But I guess I just have to ask, just given the geopolitical environment that we're in, particularly with exposure, potential exposure to Russia and Eastern Europe and then we also have this element of higher oil prices and what that can do for the macro environment more broadly, to what extent did you sort of incorporate those factors into this year's guidance, understanding that COVID looks hopefully, knock on wood, largely behind us.

Yeah. So thank you. So obviously we try and be thoughtful and transparent in the guidance. That said, we don't have a crystal ball for what's going to happen geopolitically or macroeconomically. I think we feel confident in our ability to execute sort of despite the uncertainty. Specifically on your point about Russia, I would just call out, we have very limited revenue in Russia for fiscal 2022, was roughly a low single-digit millions revenue contributor. We're obviously complying with all those relevant laws and regulations as they emerge. But obviously, if there are future things in the horizon that we can't contemplate we'll certainly update you, but we feel good about the outlook.

Super helpful context. Thank you, Michael and congrats.

Thank you.

Thank you, Sanjit. The next question comes from Raimo Lenschow with Barclays. Please proceed.

Thank you. Dev, could you speak a little bit to the relationship with the big hyperscalers? It looked like the deals influenced by them kind of shot up quite a bit, like -- and obviously, this funny relationship of coopetition. But what you saw -- what did you see there in terms of like how they are interacting with you and how that relationship is changing over time? And then I have one follow-on.

Sure. The basis of our relation with the cloud providers is really, first and foremost, based on the strong product markets of MongoDB. MongoDB is incredibly popular and the popularity spans all major cloud providers. I think what we have shown first with Google as we started working with them very closely, given their ambitions to grow their business quickly is that we could partner effectively and help them acquire a lot of new customers, a lot of new workloads onto their platform. This did not go unnoticed by some of the other cloud providers, and we started going deeper with AWS. As people may remember, in early 2018, AWS introduced a competitor, a clone of MongoDB and there were some worries about how that relationship would evolve. And I'm pleased to say that I feel like the relationship has never been stronger. We have deep relationships in the field. We partner more on deals. And AWS has recognized that MongoDB drives a lot of demand to their platform. And so the relationship there is very healthy. And we're also doing a lot of business with Azure. So I would say our win rates are still very high against them when we go head to head against them. But clearly, they're good partners, and we're investing a lot in those relationships.

Yeah. Okay. And then, Michael, on the guidance, like it's really impressive to see the margin guidance, if I consider the $45 million to $55 million extra spending that we see this year, can you just talk a little bit about the other drivers that helped you achieve that?

The what -- sorry, that helped us?

So just like it does look like the internal efficiencies or the scale of the businesses that allow you to do that because that looks -- despite the spending, the outlook is actually better than what I modeled?

Yeah. No, No, we've been continuing to show meaningful operating leverage. We feel good about that. We're seeing scaling throughout the business. That said, we certainly are investing to pursue the market opportunity. That means both investments in sales and marketing and in R&D and obviously, sort of everything else to scale the business. But no, we've been really pleased both at the gross margin line with the success, given where Atlas is as a percentage of this and executing against the plan there, as well as on the bottom line. And I think that we'll continue to execute on that, but we feel really good about where we are.

Perfect. Congrats. Well done.

Thank you.

Thank you.

Thank you, Raimo. The next question comes from Phil Winslow with Credit Suisse. Please proceed.

Hi, guys. Thanks for taking my question. If we look at just an analysis of just sales efficiency, it seems that the productivity continues to rise, but you also continue to add capacity. Would give us a sense of just what you're seeing from the inside in terms of productivity and how you're thinking about this coming year in terms of just capacity adds but also productivity? Thanks.

Yes. Thanks, Phil. We feel really good about the performance and the productivity of the sales organization. It performance was broad-based. One of the traps in software sales is that you can get -- get some big deals can mask weak performance in the rest of the sales cohort. We're not seeing that. We're seeing broad-based performance across our entire sales teams across all the different theaters. So that's giving us a lot of confidence. We're adding a lot of people quickly. MongoDB is viewed as a very attractive place to come to. We believe that we really help people understand and master the art of sales. And so we've put a lot of time and effort into developing our people. We -- Because we're growing so fast, we give people tremendous opportunities for growth. So people can really grow their careers here at MongoDB and we push the envelope on innovation. So we're doing things that not many other companies are doing. And so all things put together, we feel really good about the sales organization and as a result, it's the reason why we're investing aggressively to expand the capacity of that organization.

Great and thanks, guys. Keep doing the great work

Thanks, Phil.

Thank you, Phil. The next question comes from DJ Hynes with Canaccord. Please proceed.

Hi, guys. Nice set of numbers here. Dave, we've seen a bit of an inflection in revenue per customer over the last couple of quarters. I'm wondering if that's more a function of your big customers getting bigger, right? I mean, we saw a record $100,000-plus adds -- or is it all the smaller starting Atlas customers that you've added over the last couple of years now kind of ramping to more material spend levels. I'm sure it's a bit of both, but I'd love to get some qualitative cover -- color.

Yes. In general, the expansion rates of the cohorts are very strong, but I think a lot of it is also due to mix. When we changed our -- the way we want to engage with customers, we saw a big influx of self-serve customers moving to a direct relationship. So obviously, that change in mix affected the revenue per customer number. And as things have kind of as a gone to more of a steady-state function, you're seeing those numbers stabilize. But we feel like we have a really huge embedded growth opportunity in our customer base, and that's where we're spending a lot of time with as well as acquiring new customers.

Yes. Okay. And then, Michael, my follow-up for you. I mean, obviously, the EA strength in the quarter drove the strong cash flow that we saw. As you look out to fiscal 2023, do you think Mongo can be free cash flow profitable?

Yes so – thanks for that DJ. A couple of things, I would say part of the -- so in general, it's a very strong quarter, Q4 from a cash flow perspective. I would say that's less as a result of the EA sales in and more a result of the strong Q3 inclusive of some of the pull forward that we called out previously. Typically, there is a little less in truck quarter collection from when you book business, obviously, it depends a little bit on the linearity. We haven't given specific guidance around operating cash flow positive, but I certainly do think it's noteworthy not just a strong and significant magnitude more than $20 million in Q4. But the fact that we had $7 million in positive operating cash flow for the full year I do think is noteworthy. It's not a specific milestone that we've focused on or set out, but I do think it's a positive reflection on the underlying trends of the business.

Yes, I agree. Okay. Thank you.

Thank you, DJ. The next question comes from Karl Keirstead with UBS.

Thanks a lot. Maybe two for Mike. Mike, back to the Atlas strong sequential usage growth, I'm sure you're well aware that some of your peers, snowflake confluent Datadog, that also have AWS-centric usage models called out a bit of a usage lull or unusual consumption seasonality in December, January. Did you see that? And if you -- perhaps it was offset by other drivers, or did you not? And if you didn't, what makes your model different from those peers? Thank you.

Yes. Thanks, Karl. So no, we saw a very strong behavior in Q4. The cohort expansion was in line with historical trends. So nothing sort of abnormal or atypical there. It was a strong quarter in Q4, as we mentioned, in part because the beginning run rate was higher given the exceptionally high expansion in Q3, but Q4 itself behave pretty normally. So I think it doesn't like fit the patterns that you're describing. Hard for me to speculate exactly all the reasons why as it relates to those other businesses, other than the fact that from the database standpoint, that it sort of has an always on component to it, for lack of a better phrase as opposed to something that is a specific...

Episodic.

Yes, episodic or a query -- analytics query or batch-query driven basis.

Yes. Okay. That's perfectly clear. Thanks for that, Mike. And then my follow-up, I just want to be crystal clear on what you're conveying when you say that you're not assuming a pandemic impact in your fiscal '23 guidance. Mike, are you really saying that you're guiding less conservatively going forward, and therefore, implying that perhaps we should not be thinking that the beat cadence will maintain at the level you've put up in the last two to three quarters?

Yes. The way I would think about it Karl, is that our guidance philosophy hasn't changed, but I think our perception of the uncertainty or risk of the environment has changed and given how well we've operated over the course of the last two years of the pandemic, it would be hard for us. Despite the uncertainty that still exists, I think we just have a lot of confidence that we can execute in that environment, and that hasn't been the case the last two March's when we've provided that guidance. So, I wouldn't describe it as a change in philosophy or a change in conservatism, but I think it's just sort of reacting to the facts as we have them and less risk and less uncertainty than we've had previously.

Got it. Okay. That’s very clear and congrats the whole team on the great results.

Thanks.

Thank you, Karl. The next question comes from Brent Bracelin with Piper Sandler. Please proceed.

Thanks for taking question here. Michael, it certainly is impressive to hear all this talk about positive free cash flow and positive cash from operations. I guess, as you think about the guide for next year, clearly much better than when what we had modeled from an operating perspective. Where do you expect to see the most operating efficiencies coming from in the coming year? And then, Dev, if you could talk a little bit about Atlas? The usage trends per customer are showing the highest growth rate that we've seen in three years. I'm just wondering here if that's seasonally strong or do you think this is just tied to a broader adoption, broader number of customers standardizing the platform? Thanks.

Yes. Thanks, Brett. On the first part of the question, I don't think that there's any material skew sort of one way or other. If you look across the board, I think we'll continue to show progress overall, and that will come from sales and marketing, R&D and then overall, the rest of the organization in G&A. So we're not intentionally trying to skew that in any particular way. As Dave mentioned, we feel like we are still quite thin on the footprint coverage. And so we're trying to expand sales and marketing as rapidly as we responsibly can just to make sure that we're in as many conversations and customer dialogue as possible. And then given the breadth of the product road map and the returns that we've been getting on those investments, we think that it's prudent to invest in those as well. So there's not one particular lever that we're looking to sort of disproportionate incrementally scale. But you'll see scaling in aggregate, as you can see in the results and in the guide. And then, Dev, do you want to talk about the other.

Yes. So Brent, on your question on usage trends, whether it's seasonal or there's some other things going on. I would say it’s definitely the latter. We are definitely seeing broader adoption of Atlas by customers. We're definitely adding more customers and more workloads to Atlas. And I'd also say the mission criticality of those workloads is increasing from, say, four or five years ago to today where people are now running major elements of their infrastructure, major elements of their business on our platform. And these are not applications that you turn off or slow down. And I think that's why you're seeing the usage strength as we've observed.

Yes, I would just add, Brent, I'm not exactly sure which math you're doing, but if you're looking at sort of Atlas revenue -- average Atlas revenue for average Atlas customer, part of that today's point, will very specifically come from the fact that we're seeing increased adoption of Atlas among direct sales customers, right, which will be at a higher spending level than self-serve customers. And so that's really more of an output rather than an input. Again, we run the business on a channel basis, and that's a little bit of what's happening kind of below the surface of the math that you might be doing.

Helpful color. Great to see the momentum. Thanks

Thank you, Brent. The next question comes from Ittai Kidron with Oppenheimer. Please proceed.

Thanks. Hey, guys. Great quarter. Dev, I want to go to the macro environment. I know the events in Russia and Ukraine are on no more than two weeks old, but I'm just kind of wondering if your discussions, I'm sure you had a few of them, with customers in Europe where there's greater concern that the continent will go into recession or several companies will go into a recession over there. Is there any change in the tone in the discussion and that investment planning? Are things getting allengated as far as deal closings? Any color that will help us understand what the state of mind is over there right now, of course, outside of Ukraine and Russia?

Yes. Outside of UK and Russia, we see no change. We feel really good about Q1 as for the guidance, and we look at this on a daily and weekly basis, and we're seeing no change.

Very good. Thanks.

Thank you, Ittai. The next question comes from Rishi Jaluria with RBC. Please proceed.

Oh, wonderful. Hi, Dev. Hi, Michael. Thanks so much for taking my question. Two -- just two on my end. First, I wanted to start with the serverless offering, which is in preview mode. Can you talk a little bit about how is customer feedback and early adopter feedback been? How to think about the long-term impact of this starts to see real adoption? And maybe help us understand some use cases that you see for serverless versus the core Atlas? And then I've got a follow-up.

Sure. So the whole notion of serverless is to essentially abstract the way the need to do capacity planning that people can basically connect to our database, start using it and not have to worry about it anymore in the database to just scale up and down based on the needs of the application. And so the early feedback has been incredibly positive. We're seeing a lot of interest. We have a lot of people using it today. We're getting great customer feedback. And you'll see us continue to invest aggressively on serverless. And we look -- we obviously will have our own dedicated offerings as well as serverless. But over time, we think service will become a more meaningful part of the business. But we're super excited by the feedback so far.

All right. Great. And then I wanted to go into the NRR. Showing 120%-plus NRR at $1 billion and ARR is really impressive. Can you talk a little bit about what are kind of some of the drivers of being able to maintain this level of NRR at the scale? Is it a function of expanding workloads, new use cases, upmarket momentum, lower churn. Maybe walk us through a few of the drivers for keeping it up and how to think of that metric going forward? Thanks.

Yes. So we believe that we have built a very durable business. And a big reason for that is we really focused on acquiring workloads and acquiring customers and acquiring workloads in those customer accounts. And unlike other businesses where you can grow very, very quickly because you just basically manage a lot of data. We -- our unit of measure in terms of account penetration is the number of apps or number of workloads. So they do take time. No one's going to move 100 workloads overnight, but you have a great opportunity because we are so fractionally penetrated in even our existing accounts even though they may be large customers, and they're spending a lot of money with us, there's still thousands of apps that we can win, whether they're new apps or building or existing apps that they want to modernize. And so -- we also put a lot of focus on making sure our customers are successful, really ensuring that the customers get value very, very quickly from our platform, which obviously affects retention rates and churn. And so the degree to which we do that well, that also affects our net expansion rates. And so I think those two factors, along with adding new customers in general to our platform really help keep that high net retention rate.

All right. Great. Thank you.

Thank you, Rishi. The next question comes from Tyler Radke with Citi. Please proceed.

Hey, thanks for taking the question. Obviously, the Atlas revenue was really impressive this quarter. But I think the Enterprise Advanced revenue really stood out to me this quarter. It grew seven points faster than you saw last quarter where there was kind of a pull-forward dynamic. I was wondering if you could just kind of unpack the drivers of the EA performance this quarter. Was it primarily driven by an uptick in new customers? And given that EA customers tend to be larger companies, are you seeing any change in terms of the mix of legacy or traditional database migrations? Thanks.

Sure. Yeah. As we mentioned and as I commented on in the prepared remarks, it was obviously a very strong Enterprise Advance quarter. Q4 historically has been the strongest EA renewal base. We clearly demonstrated and observed very strong demand for more EA workloads. Most of the -- just if you step back more generically, most sales of EA are to existing EA customers, right, who are expanding incremental workloads. And in addition as we called out these sorts of focused accounts that we're putting more resources around, a number of them are primarily EA accounts. And we had a lot of success, deepening our penetration with those customers. And given that Q4 is a large renewal base, that's often a good time when that takes place. Certainly, EA will be volatile quarter-to-quarter given 606, but it continues to be very strong. And again, our goal is really just to give the customer’s choice and meet them wherever they are in their cloud journey.

Great. And maybe a question for Dave, so you've released a lot of kind of interesting new capabilities around support for time series and in streaming, I'm just curious, how you're seeing kind of the up-tick in operational intelligence or real-time analytics within your customer base? And how impactful is that going to be in terms of growing existing accounts going forward? Thanks.

Oh! So we believe that the trend of applications are getting smarter and they get smarter by embedding more data and more real-time data and more analytics into their into the application is a trend that's going to increase dramatically, which is why we believe we're well setup to take advantage of that trend. One, by definition, we're an operational to platform, but that's where you get the live data. Two, we have a distributed platform, so you can segregate nodes, one for essentially writing the transaction and the other notes for reading data. So this enables you to do that without impacting user performance. Three, we came out with capabilities, where if you want to do a sophisticated query, obviously, operational data is constantly changing. You can take a snapshot of the data at some point in time and run a query and get that result and embed that result back into the application. So we're embedding more and more capabilities into our platform to enable developers to build smarter applications. And as I mentioned, with the advent of faster networks, faster chips, better algorithms, the sophistication of use cases are only going to increase. And we feel like, we'll be -- we're really well positioned to take advantage of that. And you'll see a lot of our investments go in that direction.

Thank you.

Thank you, Tyler. The next question comes from Fred Havemeyer with Macquarie. Please proceed.

Hey, thank you. In your prepared remarks, Dev, you were mentioning it was [Indiscernible] here was scaling from just MongoDB community addition on to MongoDB Atlas. And I got me thinking, Dev, would either you or Michael will be able to provide any context on some of the larger Atlas customers are generally MongoDB customers? And how many of them began is just kind of like community addition start-ups and scaled into some of your larger and more material accounts?

Well, in the early days, all of them came from community. And so – and what they were attracted by was the notion of really outsourcing all the undifferentiated work of provisioning, configuring and managing a distributed database and essentially focusing on building great apps that transform their business. What we've done over the last few years has really enabled a free tier of users on Atlas. And so they essentially can try and test and play with Atlas. And then we get those customers to migrate into our paid offerings, and we're starting to see increased success with that motion where people start our free tier because they don't even want to – they just want to work on the cloud. And then very quickly, they start using level of usage and interest ends up getting them to a paid offering. So that's another trend that we're seeing that's emerged. And so obviously, it all starts with the product markets that MongoDB, the document model, the way we just make it so easy to build applications quickly, the way we enable developers to innovate fast. And obviously, Atlas just allows us to – allows them to essentially focus on what's important and leave all the plumbing to us.

Yeah. I would just add that Atlas self-serve, whether it's free tiered or paid, it's sort of the modern more contemporary version of downloading community server and managing it yourself. And as we pointed out before, more than 50% of Atlas ARR was self-serve source, right? So it's just sort of reinforcing that same motion that Dev was describing.

Okay. Thank you for the context there. And I think I'm one of those free-tier users. Eventually, I'll scale up. Second question I wanted to ask about is – on thank you. I'll head over to your office and knock on the door and ask for some help, just like back in the old days. I'd also like to ask about cash in the balance sheet and with generating some free cash flow this year, material free cash flow this year. I wanted to ask how, Michael, are you thinking about cash deployment within MongoDB? Generally, are you thinking about – just really, how are you thinking about cash in your balance sheet? And how would you characterize MongoDB's M&A appetite if you have one?

Yeah. So in general, I would say that, we've got an appropriate, and very healthy cash balance with $1.8 billion. It gives us the confidence to think long-term Obviously, we're continuing to make operating leverage progress. But as we see needs or opportunities or high-return investments, we're able to make those. I think specifically, from an M&A perspective will be opportunistic. We feel like we've got a lot of organic running room to go, but we'll certainly be opportunistic as needed. Dev, I don't know if there's anything you want to add to that?

Yeah. I would say that, we obviously stay very closely ground in terms of what's happening in the data infrastructure space. There's a lot of – there’s a lot of activity in the start-up ecosystem. But as Michael mentioned, we feel like we have a lot of opportunity with our core offerings. We have done some acquisitions in the past. They tend to be smaller, more surgical acquisitions. And if we do end up doing anything, it's probably more in that category than anything meaningful.

Thanks for the context. And congratulations on a strong quarter.

Thanks, Fred.

Thank you, Fred. The next question comes from Steve Koenig with SMBC. Please proceed.

Hi, gentlemen. Just one question today from me. Last week, it was pretty surprising to see from Snowflake, how performance improvements in their platform negatively impacted effective pricing and the revenue outlook. And I don't think I've ever seen that either working in or covering database companies. And so I'm wondering, without commenting on them, tell me about maybe your model why won't performance improvements negatively impact you guys? And is there a difference between operation and analytic data stores that's relevant here? Thank you very much.

Yes. Thanks, Steve, for your question. I would say the big difference is our unit of work is the application of the workload. I would say other companies unit of work is the amount of data they have to ingest. And I think when people think about building new applications, there's obviously some sort of business case, essentially some funding to solve some important business problem or seek some new business opportunity. So they think about that investment very differently than the amount of data that we're constantly collecting. So as you can imagine, it's not surprising to me that some customers, when they see their bills escalate probably frustrated at the rate and pace of how their bills are escalating, whereas as customers are building new applications on our platform for them, that's a new decision on a new use case and for them, it makes sense to obviously invest the appropriate resources and technologies to deliver on that use case. So I think that's the big difference that you're seeing. And we have made performance improvements in our platform, but it doesn't show up in the way, I think, it does for other companies. And I think we feel very, very comfortable about the value proposition we’re our offering to our customers.

Awesome. Great. Thanks Dev.

Thanks, Steve.

Thank you, Steve. The next question comes from Mike Cikos with Needham & Co. Please proceed.

Hey, guys. Thanks for getting me on for a couple of questions here. I did just want to walk through the guidance real quick for Michael. If I'm thinking about that revenue guidance that you guys provided for the full year of fiscal 2023 and parse out Q1, but is that implied deceleration? Is that just -- should we be thinking about that as just more difficult year-on-year comps? Is that -- or are there any other puts or takes to that? And then the second point, gross margins has really just held up phenomenally given the amount of exposure coming in from Atlas as it becomes a more meaningful driver to total revenue. Should we still expect some gross margin erosion going forward as that Atlas becomes a larger piece because of the associated infrastructure component?

Sure. You think about your gross margin, that's the first question, that was...

Guidance. Guidance.

Guidance. Yes. Yeah, yeah. So -- thank you. No, I think overall, on the guide, we feel like it's a very strong outlook and we're guiding to significant durable growth at scale. I would say -- two key factors to point out. One is we continue to expect more Atlas over time. And so less 606 impact of EA. Obviously, over a 12-month period, that also comes out in the wash. But given that upfront term license component piece as more of the business shifts from EA to Atlas over time, we expect to have less of that. And then, just the second point would be what you called out, which is the strong Atlas performance, particularly in the back half of the year sets up a very significant compare. And then on the gross margins, yes, we've been super pleased with how we've done on our gross margin game plan. We've executed better than we had thought we could if we thought that was one this size and scale and the 58% of revenue, you'd say we have 74% non-GAAP gross margins or 77% non-GAAP subscription margins, I would have doubted that we'd be able to execute that. I don't think we're prepared to call the bottom, but I do think that we are closing in on one given the strong performance of our optimization program.

Thank you very much for that. I hope I didn't mean to sound like the revenue guidance is not strong here. I just wanted to make sure I understood the puts and takes for the full year. And just one more.

I understand.

One more, if I could. I think, the last time we received an update as far as incremental OpEx. And I'm thinking about that $45 million to $55 million that we're talking to as commercial activity normalizes, right? For the, I guess, backwards looking here, but for fiscal 2022, I think we might have been expecting, call it, $9 million to $12 million based on the most recent data point we had. I just wanted to see how the year ended up finishing up versus that $9 million to $12 million, I guess, guideposts that we had previously had when thinking through the Q4 upside.

Yes. I think what we've talked about it, we said in the end fiscal 2022 came out broadly in line with our fiscal 2021 spending, and we had expected to spend much more in fiscal 2022 on the sort of I'll call them, COVID-related expenses for lack of a better phrase. And just given the environment and backdrop, we did not see as much activity there.

Makes a ton of sense. Thank you very much for getting me on guys. I really do appreciate it.

Thanks, Mike.

No problem

Thank you, Mike. That concludes the Q&A session. I'll pass the conference back to MongoDB's CEO, Dev Ittycheria, for additional remarks.

Thanks, Selena. I think it's fair to say that we had an excellent quarter. We're seeing to see strong momentum. We believe that we're solving fundamental problems and addressing fundamental pros that developers have and the value of our platform, offering one unified integrated way to solve and address many use cases that very well played in the marketplace. So -- and that's evidenced in our continued strong customer growth. So with that, I want to thank everyone for joining us today, and we'll talk to you soon. Take care. Bye-bye.

That concludes the MongoDB Fourth Quarter FY 2022 Earnings Call. Thank you for your participation. You may now disconnect your lines.