MDB Stock | MongoDB Inc Q4 2021 Earnings Call

Thank you, Brian, and thank you to everyone for joining us today. I will start by reviewing our fourth quarter results before giving you a company update. Looking quickly at our fourth quarter financial results, we generated revenue of $171 million, or a 38% year-over-year increase, and above the high end of our guidance. We grew subscription revenue 39% year-over-year. Atlas revenue grew 66% year-over-year and now represents 49% of revenue, and we had another strong quarter of customer growth, ending the quarter with over 24,800 customers. I believe we will look back at 2020 as the year that put an exclamation point on the need for businesses to reinvent themselves using software and data. As the world increasingly becomes digital-first, there is no off-the-shelf software that organizations can buy to differentiate themselves against their competition. To be blunt, you cannot buy a competitive advantage; you have to build it yourself. And to build your differentiated future using software and data, you have to maximize the productivity of your developers. Managing data is a developer's most challenging problem and the biggest drain on their productivity. Legacy platforms are not designed for how developers think and code, nor are they designed for performance and scale. This problem only gets worse as the data intensity and performance requirements of modern applications increase. Consequently, developers spend an enormous amount of time working around the limitations of existing solutions versus spending time building better applications and user experiences that drive a competitive advantage. Moving to the cloud held out the promise of reduced complexity and improved productivity. What many early cloud adopters have learned the hard way is that moving to the cloud often exacerbates the poor state of their data infrastructure. First, companies decided to lift and shift their existing on-prem relational workloads to the cloud, replicating their on-premise problems in the cloud. As a senior IT executive in one of the world's largest asset management firms recently told us, he doesn't know of a single one of his peers who didn't come to regret the lift-and-shift strategy. Second, given the known limitations of relational databases, cloud providers promoted a number of other single-purpose databases to address more diverse requirements, which in turn created a larger number of data stores for customers to learn, manage, and integrate. This dramatically increased the complexity of their data architecture. Third, cloud providers encourage customers to go all-in with their proprietary offerings across the IT stack. The overwhelming number of proprietary point solutions not only slows developers down but also deepens cloud vendor lock-in. Given the failings of existing approaches, developers and enterprises are clamoring for a modern application data platform that accelerates innovation. To be effective, a modern platform must support a broad range of use cases, meet stringent requirements for resiliency, security, and scalability, and provide enterprises the flexibility to run applications wherever they want. Our FY21 results indicate that MongoDB has clearly established itself as the world's preeminent application data platform for building the applications of today and tomorrow. We are becoming a more strategic partner to customers as they increase their sense of urgency to modernize their IT stacks. In a number of our large accounts, we've become an enterprise standard, which indicates our strategic importance and positions us to win more workloads. The journey from the first win to becoming a standard can take a number of years as we build trust with and support from a variety of different constituents within the enterprise, including the C-suite. While each customer story has its unique elements, we have observed that they tend to follow a similar path on the way to declaring MongoDB a standard. We usually land an account by identifying a specific pain point that cannot be addressed by existing technologies. In a Fortune 50 financial institution that is now a seven-figure customer, our early use cases leveraged the strength of the document model to efficiently capture complex loan applications with hundreds of entries. In the case of a global gaming leader, developers first started using MongoDB for microservices that leverage the rapid scalability of our technology. After establishing a presence with a customer, we leverage the success of the initial workloads to expand across divisional and geographic boundaries within the account. A top 10 U.S. bank experienced a major data center outage a couple of years ago, and MongoDB outperformed all other databases in terms of performance and availability. At the time, our team seized on the performance of our platform to more broadly serve our customers' needs, organizing teach-ins and hackathons with other app development teams across the company. Two years later, that bank's customer website experience runs on MongoDB, and with other use cases, the bank is now an eight-figure annual customer. Depending on the size of the account, the expansion phase can last many years. This is where we currently are with many of our customers today, and it is the key driver of our consistently strong net expansion rates. Once you become widely deployed, we leverage our existing internal proof points to pursue becoming a standard for future app development. Here, we emphasize the versatility of the document model to address a wide variety of use cases, meaningfully simplifying their data architecture. Second, we illustrate the performance, security, and scalability of our platform, ensuring that MongoDB can be trusted for the most demanding requirements. And third, apps built on MongoDB can run on-premise, on any cloud, or across different cloud providers, which offers real platform independence benefits no other alternative can provide. A CTO from a Fortune 100 business almost fell off his chair when we demonstrated how easily a customer can deploy a workload across two different cloud providers. He remarked he was planning to have a 50-person team work on this, and now one person can do this in a few hours. Platform independence is something the C-suite in particular cares a lot about. This strategy is working. We finished FY21 with close to 1,000 customers spending over $100,000 a year on our platform and close to 100 customers who are spending in excess of $1 million a year with us, an almost 60% increase from a year ago. As excited as we are about these stats, we are only at the beginning stages of becoming an enterprise standard. Even within our largest customers, MongoDB typically represents a small fraction of their total database spend, affording us the opportunity to meaningfully grow even in our biggest accounts. We also expanded our global reach through a new partnership with Tencent Cloud that allows customers to easily adopt and use MongoDB as a service across Tencent's global cloud infrastructure. With this partnership, the two largest cloud providers in China now provide authorized MongoDB managed service offerings, demonstrating both the popularity of MongoDB in one of the largest markets in the world and the strength of our intellectual property. Now I'd like to spend a few minutes reviewing some customer wins and interesting use cases from the fourth quarter. Acxiom, part of the Interpublic Group of companies, is a customer intelligence company that provides data-driven solutions to enable the world's best marketers to understand their customers, create better experiences, and fuel business growth. As part of its ongoing innovation in the area of real-time decisioning capabilities, Acxiom chose MongoDB Atlas, Data Lake, Realm, and Charts to be a key part of its cutting-edge cloud architecture. Acxiom has now reduced its time to deploy solutions for new customers from two months to less than 20 minutes. 1199 Funds is one of the largest labor management funds in the United States, providing comprehensive health and retirement benefits to more than 450,000 health care industry workers and family members. In response to COVID-19, the company accelerated a massive cloud transformation initiative. After migrating from SQL Server to MongoDB Atlas on Google Cloud, it was able to modernize its enterprise data warehouse and leverage MongoDB Realm to deliver a COVID-19 health screening app, which captured health questionnaires from nearly 3,000 employees a day. From the start of the project to the go-live date, the complete solution was deployed in just three weeks. Cox Automotive has 40,000 auto dealers across five continents, aspiring to bridge the gap between consumers, manufacturers, dealers, and lenders at every stage of the automotive experience. In response to COVID-19, the company's mobile car care division, RideClean, developed a mobile platform enabling drivers to schedule and technicians to manage and perform on-site disinfection services with PureProtect. RideClean turned to MongoDB Realm Sync for zero-latency data retrieval, offline application functionality, and bidirectional syncing of data between the Realm mobile database and MongoDB Atlas. The largest department of the U.K. government, the Department for Work and Pensions, distributes welfare, pensions, and child support to U.K. citizens. Its reformed welfare program, Universal Credit, faced an unprecedented test when COVID-19 caused claims to skyrocket by 10x. DWP Digital chose MongoDB to underpin its secure platform and scale its services across a distributed microservices architecture to support the huge increase in demand. PicPay, Brazil's largest e-wallet, has over 40 million users and is accepted at over 3 million stores throughout the country. After experiencing 126% growth in 2020, the company chose MongoDB Atlas because it needed a highly scalable cloud database with real-time performance and low TCO in order to achieve its ambitious growth goals. Enterprise security features like data encryption at rest and in transit, and data locality made it easy for PicPay to comply with GDPR and FSI regulations and provide a best-in-class customer experience to its growing user base. Today, more than one in 10 new apartments in the United States are built using Latch IoT products. Latch delivers a full-building enterprise SaaS platform that helps owners, residents, and third parties experience the modern building through services like smart access, smart home and sensor controls, and connectivity. Latch chose MongoDB Atlas for enhanced security features and the ability to move to a microservices architecture so the company could scale quickly and protect its customers' data. In summary, we had an exceptional year amidst unprecedented disruption and uncertainty. As I think back to our earnings call a year ago at the outset of COVID-19, I can't help but marvel at how we exceeded our own expectations despite the pandemic being longer and more severe than we could have envisioned at the time. I am incredibly proud of how our team executed given the unforeseen challenges. The past year reaffirmed our conviction that we are attacking an enormous market where secular winds are increasingly at our back. We have a highly differentiated value proposition, and our team knows how to execute and deliver results. In FY22, our goals remain unchanged as we singularly focus on the opportunity ahead of us. We will continue innovating to ensure that our application data platform remains the best way to build the applications of today and tomorrow. We will expand and evolve our go-to-market strategy to drive frictionless adoption of our platform, no matter how our customers choose to consume MongoDB. And we will remain focused on our people, processes, and culture to ensure that we scale to fulfill our potential. Simply put, we are committed to innovating and investing to make the most of our opportunity and maximize our long-term value. With that, I'll turn it over to Michael.

Yes, so Sanjit, I'd say a couple of things. One, I would say that obviously there's a big secular trend about the move to the cloud, but what's happening is that people are recognizing that just lift-and-shift is not the right approach, and that I would more frame it as lift-and-transform. And that's where MongoDB comes in. People recognize the benefits of our very flexible data model through the document model. They recognize the benefits of running and using multiple use cases because of the versatility of the document model. They also appreciate the scalability and performance of our distributed architecture, and even more pronounced because Atlas basically automates all that. But we're also seeing a new trend, which is the increasing importance of multi-cloud. And customers are more and more interested in multi-cloud and being able to deliver a multi-cloud solution for either resiliency or other reasons. And so we see customers building new apps on Atlas and re-platforming existing apps on Atlas. So we've seen trends across the board making Atlas a very attractive destination for app development.

Well, I'll start with the hyperscale vendors first, the U.S.-based ones. You know, we have deep relationships with all three, and we're doing well across the board. I think it comes down to one, MongoDB is incredibly popular on all three platforms. Two, I think customers can separate the difference between some of the emulation offerings versus MongoDB Atlas. Three, I think people are getting more and more comfortable with our document architecture and how versatile it is and how it really enables innovation to happen very, very quickly. And I would say that, so we're partnering a lot in the field with the cloud vendors. The Tencent relationship is fairly new, so I think that's going to take a little bit of time to take hold. But the fact that we now have relationships with both Alibaba and Tencent in one of the largest markets in the world, we feel really good about. And then I would say the other partnerships in terms of the global systems integrators are also paving the way. We're seeing a lot of activity as they bring us into deals or we're using them, or customers are using them to augment their development capacity. And we're also working with some boutique SIs who have some real domain expertise around MongoDB to help accelerate the customers' time to market for their needs. And so I would say we're seeing, there's not one partner that's moving the needle more than anyone else. We're basically seeing broad-based help across the board across our partnerships.

Right, so I mean, I would say there's a few factors at play. One, I think it's become clear to everyone that MongoDB is a very viable, mission-critical platform in contrast to, and as a viable alternative to relational databases. And frankly, we don't hear anyone in our customer base talk about growing their SQL Server, Oracle, or DB2 estate. So people are definitely moving off their legacy platforms. And then when they think about building on a new platform, they quickly understand the versatility and the flexibility of the document model. They also appreciate the performance and scalability of our architecture. And what's interesting now is, as I mentioned earlier, multi-cloud has become an increasingly important consideration. Some customers want cloud provider resiliency in a single country where only a cloud provider only has one region. Another reason for multi-cloud is that customers...

Often maybe acquire other companies, and so they start beginning questions: should I put everything in one cloud? And then the third reason is that they want to take advantage of different capabilities offered by different cloud providers. And so we see a whole host of reasons why we're acquiring new customers. And I would say a lot of it's just a function of MongoDB just emerging as truly the preeminent application data platform.

Yeah, so Mohit, what I would say is as we mentioned in the prepared remarks, even in the larger accounts we still believe we have a very small percentage of their total database spend. Now I do want to make clear, MongoDB is not a product that you just buy and then start using. You have to actually build an application on top of it. So there's a certain rate and pace of app development, whether you're building new applications or re-platforming existing applications. But what we've seen, and as we mentioned, once we get into an account we find it reasonably easy to expand into adjacent opportunities. And the adjacent opportunities tend to be bigger than the initial deal. And so we don't expect to see a meaningful change in that this coming year. And while the world may start opening up and people may be potentially building new apps faster, we think that can only help our business. But right now we feel that we're really well positioned for the openings that we've already uncovered and these new customers. And we're still continuing to seek new customers going into this year so that we continue to build a healthy pipeline of a large customer base.

Yeah, so I think we've talked about it in previous calls, but we've been very pleased with the success we've been seeing with our execution through our sales channels. And so we're essentially doubling down on what we did this past year. The sales organization and our marketing organization executed really, really well, and we're also seeing benefits of a flywheel effect between our self-serve channel and our sales channel. As Michael mentioned, our sales relations are getting better and better at understanding product usage signals to figure out which customers would benefit from having a more direct relationship. And the self-serve channel becomes a very easy channel for us to acquire new customers. So that's paying dividends as well. So I think you'll see us continue to refine the model, but you're not going to see any major changes. We'll probably get more sophisticated around segmenting certain parts of the market. And there's certain parts of the market that we still have very poor geographic coverage. They'll see us expand our sales reach in markets where we feel that we can benefit from adding more people in the region.

Yeah, so we see the bulk of investments going in two areas: one in product and the other is in go-to-market. Obviously on the product side, we're really excited about the market opportunity we're going after. The market just seems to be bigger and bigger the more time we spend in it, and we're clearly getting a lot of traction. And our customers are asking for more and more capabilities. We talked about some of the new products we gave last summer, they're starting to get very healthy traction. And so that gives us even more confidence about other things that we want to build based on customer feedback as well as our own strategic insight in terms of what we think the market needs. And by the way, I think we have a first-class engineering and product organization, so it makes that decision that much easier. The second point I'd make is to the earlier question, we've seen a lot of success in sales. So the classic thing is when you see success, you continue to invest. Our performance is broad-based, and we're seeing great performance both through our field organization as well as our inside sales team. And you're going to see us invest aggressively in both areas. I think you're going to see us, as I said, probably do a little bit more refinement of how we go to market, a little bit more segmentation across the market, a little bit more focus on hunting versus farming, perhaps even a little bit more focus in the mid-market to what you implied. But it's all about just going out and capturing more of the market because the market is so large, and leveraging all the lessons we've learned so far in terms of how we build our sales processes, how we generate pipeline, and how we prosecute deals.

Yeah, so what I was trying to convey in my prepared remarks is that growing an account takes time. You kind of go through a set of stages. The first stage is landing a deal. The second stage is using the early success of your initial win to expand into adjacent opportunities. And then as you get propagated across the organization, you end up becoming declared a standard. What that really implies is when you become standard is that you're essentially giving the development teams free rein to use MongoDB for pretty much any use case. And so it becomes that much easier for the organization to deploy new workloads on MongoDB. But the act of actually building and writing an app and then running it, whether it's on-premise or in the cloud, still takes time. It's not like these apps magically create themselves. So there's still obviously some effort required from the development teams to build those applications. So there's a certain rate and pace by which you can expand the workloads on your platform. But by definition, as we grow, as people get more and more comfortable using MongoDB, as we have more and more proof points, and now with nearly 25,000 customers we have proof points almost across every potential use case, every industry, every geography, and so it gives customers a lot of confidence to bet on MongoDB. And so it becomes marginally that much easier to win the next incremental workload. But it does take some time. It's not like magically you can finally re-platform a thousand apps on MongoDB overnight.

Yeah, given the nature of our application data platform, you typically will not see us do some major acquisition and kind of try and bolt on some other solution onto our platform. That becomes very hard to do. If you look at our history, what we have done is made some surgical acquisitions. You mentioned Realm earlier. We made an acquisition of WiredTiger, which really allowed us to deliver on some enhanced performance capabilities around write-intensive use cases and became the underlying storage engine for our core database server. We also did an acquisition of mLab, which kind of accelerated our expansion into offering MongoDB as a service. But those were, I would say, more surgical acquisitions. I don't think you'll see us go do some massive mega acquisition. But we will obviously, whenever we see something that potentially allows us to accelerate our product roadmap in a certain way, I think you're right, we have the resources to go do those kinds of things. And we're constantly kind of talking to people in the marketplace.

I would say a big percentage of our seven-figure accounts are already using Atlas, but there are definitely some seven-figure customers who are EA only. So there's a mix, but there's a broader base of Atlas customers. And as I said, we have a lot of customers who are moving more slowly to the cloud but view MongoDB as a very attractive platform because they will never have to rewrite the application as they transition from on-prem to the cloud or from one cloud provider to another cloud provider, which makes it a very attractive future-proof platform for customers.

Right, so again, just as a reminder for people, we GA'd three products last summer: Realm, Atlas Data Lake, and Search. And let me go one by one. So we've seen solid reception of Realm, especially now with the availability of Realm Sync, which really enables developers to build very sophisticated mobile applications and synchronize the data at the edge with data at the core. That saves developers an enormous amount of time and effort, and it's something that's quite complicated. And so we're seeing a lot of interest there, and so we're quite pleased with the traction. I would say with Atlas Data Lake, one of the most popular use cases is data tiering, allowing customers to manage large volumes of data while retaining the ability to access and query that data. And an emerging use case is being able to do federated queries using ADL as a mechanism to transform data within our platform and then create across multiple databases and storage locations. So that's really exciting. And then on Search, we've made some enhancements including a visual index builder, which has really accelerated adoption. And what we're seeing is customers like the fact that they don't have to use Solr or Elasticsearch in conjunction with MongoDB, but they can do everything in MongoDB. It really simplifies their life and their data architecture. So we're quite excited about the traction of all three products. I do want to remind everyone that the revenue does not show up as individual SKUs but as Atlas revenue. And these products do have multi-year journeys, and you'll see us continue to refine and enhance these products, and we expect them to have a strong ROI over the next coming years.

Yeah, that's a great question. So we've had ISVs since the early days. The MongoDB build uses MongoDB as the underlying data store for their product. And obviously in the early days there's more front-end applications. What's happening now is we're starting to see vertical-specific, deep-in-the-back-office ISVs, you know, in financial services, insurance, in telecom, etc., who are looking to re-platform. Obviously customer buying behaviors change, people want to consume software as a service. Those ISVs also want to stop paying the Oracle tax, and those ISVs are quite attracted by the flexibility and agility of the document model as well as the scalability of our architecture. So it allows them to serve global needs quite easily. And so I actually have a small team focused on the ISVs. And it's almost like a two-step process where we are essentially selling to the CTOs, the VP of products, sometimes the CEO depending on the size of the ISV, and then helping them build or re-platform their product on MongoDB, and then helping them generate the first set of customers. And I should also add that ISVs typically don't want to use a cloud-proprietary database because by definition that will limit them to only one cloud, and customers do care about multi-cloud. And so the fact that MongoDB runs across all the major cloud vendors and the fact that they can offer capabilities in a multi-cloud environment makes MongoDB even that much more attractive.

Right, so in concept, platform independence is something that customers care a lot about. In reality, the onus was on the customer to try and figure out how to make it work. They had to figure out how to abstract all the differences between the different cloud providers, deal with all the integrations, deal with different authentication schemes and so on and so forth. That made it quite challenging for customers to do it themselves. What MongoDB Atlas does is actually make that very easy. So when we show customers, we do demos for customers and show them that literally with a few clicks in a few minutes they can provision clusters across two different cloud providers and do it very, very easily, they're shocked because they know how much effort it would take them to try and do that themselves. So the other point I would make, which is what I said in the prepared remarks, we increasingly find senior-level stakeholders, they care a lot about platform independence, not just for lock-in, but they want it for resiliency. They want to be able to take advantage of different capabilities on different cloud providers. And so being able to use MongoDB to do that becomes very, very attractive. And so you're right, it is definitely bringing more enterprises to look at us as a very viable mission-critical platform.

Sure. So with regard to large customers, most of our large customers start as small customers. They could be five- or six-figure customers and then they evolve into seven-figure customers. On the rare occasion we might have a customer that quickly becomes a seven-figure customer, and that's typically because they have one use case or one workload that grows very, very fast. But in most situations it's basically customers adding more workloads to the MongoDB platform. And so obviously it takes some time, as you said, once you get in and win a deal, depending on the size of account, it could be multiple years as we are in the expansion phase of winning more and more business. And at some point in time, when you start talking to senior-level stakeholders, they see how popular we are with their developers, they see how widely spread we are across the organization, and they want to build a more strategic relationship. And for us, we want to be declared a standard, where by definition a developer doesn't have to seek permission to use MongoDB. So it's really a function of leveraging our successes early on, proving out the scalability and flexibility of our platform, and then really showing them that MongoDB can be truly a versatile application data platform, not just for on-premise but across all the major cloud providers as well. And then in terms of your second question, return to work, yes, I mean obviously today we're all working from home. We have told our employees that we don't expect to be a 100 percent remote organization. We do believe that there's value in our people coming together. There's value in coming together for team meetings, for planning sessions, for the social benefit of connecting with people. We also believe that employees earlier in their career will benefit from more direct mentorship from the managers in more of a direct contact basis versus over some sort of remote environment. But we also believe that we've learned a lot of lessons that you can run a business of our scale and size remotely. And so we're not going to force everyone to come back to the office. We're going to reimagine our offices and create more multi-tenant environments where people can have a shared desk and come in maybe two, three days a week. Some people may work remotely for 80, 90 percent of the time and maybe come to the office once in a while for key meetings. And so this also gives us more flexibility to look for talent in markets that we may not have naturally considered, because we now have seen how working remotely can be quite effective. And so we'll be more aggressive in sourcing talent for markets that we typically did not seek in the past.

Yeah, I think what you should think about these new capabilities is really adding to the richness and competitive and comparative advantage of our platform versus trying to be stand-alone products that we just position and market independently. And so what it means is that people can run more use cases on MongoDB, have a much more simplified architecture rather than having a bunch of bespoke implementations for every use case that they potentially want to implement. They can obviously query that data much more easily, manage their infrastructure more easily, the developers only have one interface to learn, and essentially they can run those workloads anywhere. They can run on-premise as well as they can run on any cloud or across cloud. So that's the real benefit of the expanding capabilities that we're adding. And we're seeing traction across the board. So I would say, again, all these products were GA'd last summer. We're still in the early days, but we're really excited and it's really proving out the platform strategy. And as we noted, we already have some nice set of customers who are using the new products, and they're very sophisticated customers as well. So we feel good about the reaction we're getting.

Well, I want to thank everyone for joining us today. I just want to make a couple of summary points. One, I think it's clear that enterprises everywhere are feeling an extraordinary sense of urgency to reinvent themselves, and that to do that using software and data. Second, we're seeing great success in building more strategic partnerships with customers, as evidenced by the growth of our six- and seven-figure accounts. And lastly, I would say that the accelerating secular trends and our track record of success give us increased conviction to aggressively invest in order to maximize our long-term potential, and that's what we're doing. Thank you for joining us, and we look forward to speaking to you soon. Take care.