Good day and welcome to the MongoDB Second Quarter Fiscal 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Brian Denyeau with ICR.

Please go ahead sir..

Great. Thank you, Chuck. Good afternoon and thank you for joining us today to review MongoDB's second quarter fiscal year 2021 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 opportunity and future growth, our financial guidance, and the anticipated impact of the COVID-19 pandemic on our business and the result of operations.

These statements are subject to a variety of risks and uncertainties that cause actual results to differ materially from our expectations.

For a discussion of material risks and uncertainties that 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 and 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, non-GAAP financial measures will be discussed in 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..

our field sales force; the inside sales team; our self-service channel; and our partner organization.

Starting with the self-serve channel, where over the past two years, we assembled a strong growth marketing team, built out processes and the infrastructure to scale our self-service business, and implemented a way to rapidly experiment and launch programs to increase the size and quality of our pipeline.

We are pleased by the traction we're seeing, particularly in terms of acquiring new Atlas customers, which have achieved a third consecutive quarter of record growth. As our sophistication managing the self-serve business grows, we are finding ways to accelerate the growth of the overall Atlas business.

We do this by identifying self-serve customers based on product usage signals that benefit from direct engagement with our sales organization. With more attention, service and support, we see a significant acceleration in customer spend.

As we have become better at identifying the self-service customers with high-growth prospects, it has given our sales teams a more efficient way to prospect our self-service customer base.

The end result is a self-serve channel that generates significant value on multiple levels as an important revenue generator in its own right and as a source of excellent leads for our inside and field sales teams. Turning to our inside and field sales teams.

Over the past year, we have also gained conviction that new Atlas customers irrespective of their size, when given proper resources and support at the outset, grow rapidly.

This is true not only for customers who transitioned from self-serve, but also for customers launching brand-new applications on Atlas or migrating their self-managed instances of community server onto our platform. As a result, we have adjusted our approach to increase the velocity of acquiring new customers.

This year, prior to the outbreak of COVID-19, we changed the incentives of our sales team to focus more on landing new customers onto our platform and less on the initial size of -- on size of the initial commitment.

Moreover, we are using our professional services organization strategically to set up customers for success early to give them more confidence in using MongoDB. The result is a third consecutive quarter of record customer growth with notable strength in our inside sales channel.

Lastly, the partner organization is sourcing or influencing a growing percentage of our business, especially with cloud providers.

We have seen strong momentum on deal activity with all 3 major cloud providers, and each cloud provider is providing more marketing dollars, adding more incentives for their salespeople to work closely with MongoDB and dedicating more headcount to better support and grow the partnership.

Given the fundamental advantages of the document model and the breadth of our product offering, customers recognize that MongoDB is the clear choice for their digital transformation plans. The combination of our leading modern data platform and our sophisticated go-to-market efforts allow us to deliver consistently strong performance.

Now I'd like to spend a few minutes reviewing some of the customer wins and interesting use cases from the second quarter. One of the world's largest telecommunications providers is currently developing a next-generation location service that can pinpoint mobile locations with centimeter level accuracy.

Their need for a flexible data model with rich indexing and translytical capabilities and a data platform that can scale quickly led them to choose Atlas this quarter.

Adair Group, the world's third largest holding company in consumer goods for do-it-yourself in decoration with an international network of 14 brands across 13 countries moved to Atlas in order to standardize app development among the developers and accelerate time to market as e-commerce demands grew during COVID-19.

Agero, a leader in the digitalization of driver system services, serving more than 2/3 of insurance companies in the U.S. chose MongoDB to help power its next-generation of software-enabled driver safety services and technology.

MongoDB Atlas has allowed them to move from one monolithic application to micro services and provide a better digital experience for the 115 million drivers they protect each year.

Highspot, the sales enablement platform that makes every conversation count, helps customers worldwide empower their remote sales efforts, which is now more crucial than ever because of COVID-19. They recently standardized on MongoDB Atlas to drive strategic growth and improve customer satisfaction.

Symphony, the cloud messaging and collaboration platform for the financial services industry chose MongoDB Atlas to support the evolution of their architecture and faster efficiencies. Atlas will allow them to adhere to crucial security policies and provide the best and most reliable experience to the customers at scale.

Lastly, one of the world's largest cloud providers has built a security solution on MongoDB that provides rich visibility, control over data traffic and sophisticated analytics to identify and combat cyber threats across their cloud services.

This cloud providers increased its commitment to MongoDB making us the primary technology for handling immense workload and highly flexible yet secure environment.

In summary, we are very pleased with our performance in Q2, while the macroeconomic environment remains challenging, we are executing well and remain focused on the enormous opportunity that lies ahead. We continue investing to capture this opportunity, and in particular, recruiting world-class talent to help us maximize our potential.

To that end, in the past weeks, we welcomed several important additions to our senior management team. Mark Porter joined us as our Chief Technology Officer in July. Most recently, CTO of Core Technologies and Transport at Grab, Mark is a 30-year veteran of the database industry.

He is an early member of the Oracle Database Kernel Group and later was a General Manager of the AWS RDS business. Mark originally joined MongoDB as a Board member earlier this year, but he got excited about the opportunity in front of MongoDB and wanted to be directly involved.

Very few people understand the relational database technology and its limitations better than Mark. So we're excited that he voted with his seat and joined the world's most popular modern database company in a senior leadership role. In early August, we welcomed Harsha Jalihal as our new Chief People Officer.

Harsha is a seasoned HR executive has been the forefront of scaling large tech companies as well as managing complex enterprises. Most recently, Harsha was the Vice President of HR, Unilever and was responsible for delivering end-to-end HR strategy and operations for the U.S. business.

Prior to that, she was an HR executive of the Cognizant during its hyper growth phase. Finally, mid-August, Rishi Dave joined us as Chief Marketing Officer. Rishi is a veteran technology and marketing executive with more than two decades of experience most recently at Vonage, where he was the company's Chief Marketing Officer.

Prior to that, Rishi was CMO, Dun & Bradstreet, a cloud data and analytics provider and earlier had a senior leadership role driving Dell's digital marketing strategy. Harsha, Mark and Rishi joined a talented and dedicated senior management team that is performing at a high level as our Q2 results clearly demonstrate.

We are excited for what we can all accomplish together as we continue disrupting one of the largest markets in software. With that, I'll turn it over now to Michael..

Thanks, Dev. As mentioned, we delivered another strong performance in the second quarter, both financially and operationally. I'll begin with a detailed review of our second quarter results and then finish with our outlook for the third quarter and full fiscal year 2021. First, I'll start with our second quarter results.

Total revenue in the quarter was $138.3 million, up 39% year-over-year. Subscription revenue was $132.5 million, up 41% year-over-year. And professional services revenue was $5.8 million, up 11% year-over-year.

To put our performance in the quarter into perspective, we thought it would be helpful to provide an update on how COVID-19 has impacted the growth of our business. First, let's talk about new business. The negative impact of COVID-19 on new business in Q2 was less than we had expected.

As Dev explained, our various go-to-market teams had executed well in the first fully remote quarter since the pandemic started. Second, in Q1, we noted that we observed a slowdown in the growth in spending from our existing Atlas customers, particularly in the self-serve channel.

In mid Q2, as the economies around the world started the gradual process of reopening, we saw an improvement in the rate of growth of our existing Atlas customers. While the trend still remains below historic levels, the improvement we experienced in Q2 increases our confidence that the slower than historical growth is simply a macro phenomenon.

Overall, Atlas' strong performance continued to be the biggest contributor to our growth. Atlas grew over 66% in the quarter and now represents 44% of total revenue compared to 37% in the second quarter of fiscal 2020 and 42% last quarter.

During the second quarter, we grew our customer base by over 1,800 customers sequentially, bringing our total customer count to over 20,200, which is up from over 15,000 in the year ago period. Of our total customer count, over 2,500 are direct sales customers, which compares to over 1,850 in the year ago period.

The growth in our total customer count is being driven in large part by Atlas, which had over 18,800 customers at the end of the quarter compared to over 13,200 in the year ago period.

It's important to keep in mind that the growth in our Atlas customer count reflects new customers to MongoDB in addition to existing EA customers adding incremental Atlas workloads. We had another quarter with our net AR expansion rate above 120%, despite the impact of the macroeconomic environment.

We ended the quarter with 118 customers, at least $100,000 in ARR and annualized MRR, which is up from 622 in the year ago period. Moving down the P&L, I'll be discussing our results on a non-GAAP basis unless otherwise noted.

Gross profit in the second quarter was $99.7 million, representing a gross margin of 72% compared to 73% last quarter and 72% in the year ago period. Overall, we are pleased with our gross margin performance, which reflects greater efficiency and scale in our Atlas business.

However, we continue to expect that we'll see some modest reduction in overall company gross margin as Atlas continues to be a bigger portion of our revenue. Our operating loss was $10.2 million or a negative 7% operating margin for the second quarter compared to negative 15% margin in the year ago period.

Our outperformance versus our operating loss guidance was in part driven by revenue outperformance, but also by the timing of certain expenses that we now expect to incur in the second half of the year. Net loss in the second quarter was $12.7 million or $0.22 per share based on 58.4 million weighted average shares outstanding.

This compares to a loss of $0.26 per share on 55.6 million shares outstanding in the year ago period. Turning to the balance sheet and cash flow, we ended the quarter with $975.4 million in cash, cash equivalents, short-term investments, and restricted cash. Operating cash flow in the second quarter was negative $10 million.

After taking into consideration approximately $5 million in capital expenditures and principal repayments of finance lease liabilities, free cash flow was negative $15 million in the quarter. This compares to negative free cash flow of $13.8 million in the second quarter of fiscal 2020.

I'd like to turn now to our outlook for the third quarter and full fiscal year 2021. For the third quarter, we expect revenue to be in the range of $137 million to $139 million.

We expect non-GAAP loss from operations to be $27 million to $25 million, and non-GAAP net loss per share to be in the range of $0.48 to $0.45 based on 59.1 million weighted average shares outstanding. For the full fiscal year 2021, we are increasing our revenue guidance to $549 million to $554 million.

We are improving our profitability expectations and now expect non-GAAP loss from operations to be $71 million to $66 million and non-GAAP net loss per share to in the range of $1.29 to $1.21 based on 58.7 million weighted average shares outstanding.

Let me provide some incremental color on how we're seeing the ongoing COVID-19 pandemic impacting our outlook for the rest of the year. As we did in our Q4 and Q1 calls, let me start off by updating you on our underlying view on the business environment that's driving our guidance.

In March, we expected COVID-19 to have a material impact only in the first half of the year. By June, we understood the impact would extend into the second half of fiscal 2021. At this point, we clearly we clearly believe that the impact of pandemic will extend at least through the end of this fiscal year.

Starting with new business, our strong Q2 results notwithstanding, we do expect to see an impact on new business in the second half of the year, while customer engagement continues to be high, we expect macro uncertainty to be a factor.

Furthermore, our forecast assumes we're continuing experiencing slower than historic growth from our existing Atlas customers, consistent with our results in Q2. Finally, as you will recall, our fourth quarter last year was a particularly strong quarter for our Enterprise Advanced product.

Enterprise Advanced has an immediate impact on revenue due to the fact that under ASC 606, we recognize the term license component upfront. That dynamic makes Q4, in particular, a tough compare for us. To summarize, MongoDB delivered excellent second quarter results.

We're executing well on our product and go-to-market strategies, which is generating strong growth at scale. We believe our clear leadership as the modern data platform of choice will enable us to continue delivering strong growth going forward. With that, we'd like to open it up to questions.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Keith Weiss with Morgan Stanley. Please go ahead..

Excellent. Thank you, guys for taking the question, and congratulations on a very impressive quarter.

Very impressive in terms of the momentum that you guys are keeping up is on both sort of the top line in terms of the nice growth that you saw there, as well as operationally in terms of those hires that you guys are able to get is both very impressive.

One of the numbers in particular that I wanted to ask you about that really popped out news, the number of new customer additions that we saw in the quarter. It looks like over 1,800 new customers.

And that's frankly, the biggest number that I have on my spreadsheet here, of you guys ever historically adding in what is admittedly a very difficult IT spending environment.

So Dev, for you, is there any change in kind of like go-to-market or sort of a better motion like you're talking about in self service? Like what's driving that strength and sort of that upper momentum that we're seeing in those new customer adds?.

Yes. Thanks, Keith. We're obviously very pleased with the customer additions for the quarter. I would tell you that, we made some changes to sales incentives at the beginning of the year prior to the outbreak of COVID-19, where we made a conscious decision that we just wanted to accelerate the acquisition of new customers this year.

And we decided that because we saw how customers grew really, really quickly, once they got into our platform and, in particular, on Atlas. And because we saw that growth happen .We said, gosh, why we just focus more on acquiring new customers and they natural will grow more.

And so before we would force -- force made a strong word, we would incentivize our salespeople to get upfront commitments and for many customers, they're not completely sure one of the platform to how quickly their workloads will grow, how much data they’ll have, how many users they have.

So it ended up being a bit of a adding a little bit more friction to the sales process, because you had to naturally -- they had to naturally try and convince the customer to make some form of commitment. Because we took that objection away, we've just seen, frankly, it's unleashed, the productivity of salespeople.

It's cut down the cycle time of some deals because avoiding that negotiation allows them to get on the platform more quickly and allows us both on the direct side and even on the self-serve side to just add a lot more new customers..

Got it. That makes a ton of sense. And then, Mike, a question for you, and this is related to the guidance. The implied -- like Q4 guide, if we take the full year, I mean, we subtract out to Q3, it looks for a pretty sharp slowdown in overall revenue growth.

I just want to make sure, it sounds like a lot of that is kind of like the tough comp that you have from strong EA a year ago period.

Is there a also sort of an aspect of mix shift in terms of the mix that you expect to be so much more on the subscription side and sort of the new business coming to Atlas versus that EA and that's also kind of impacting the year-on-year growth dynamic for total revenues as we get into Q4?.

Yes. So thanks for the question, Keith. So overall, I think we have a very healthy outlook, despite a challenging macroeconomic backdrop. But as we've indicated, we certainly expect to continue to see or to see some impact on new business in the macroeconomic environment.

We're also expecting to continue to see the Atlas consumption expansion at lower levels than we've had historically consistent with Q2. And obviously, as you go later in the year that also compounds. And the last factor, which you did call out is the tough compare.

We called out last year in the Q4 that it was a particularly strong quarter for enterprise advance. And actually, even in that quarterly call, we talked about one large multiyear customer that represented about $3.5 million just from that one customer of Q4 of last year.

And so just for those following the bouncing ball, not only do you lose that from the denominator or do you need to take that of the denominator, but you also don't get the benefit of that in this year in the numerator.

But overall, I think we are liking the dialogues that we're seeing is an incredible relevance, but there is macroeconomic uncertainty in the back half of the year..

Got it. Thank you very much guys..

Thanks Keith..

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

Thank you. One for Dev and a follow-up for Michael. Dev, I wanted to kind of drill down on the record number of new customers as well. And maybe take a slightly different spin here. On one hand, I certainly appreciate that the self-service kind of investments and focus there over the last year that you've made, that's clearly having an impact.

It sounds like there's some incentives with the sales force that seems to be resonating and lowering some adoption kind of varies as well.

But is there also an industry shift? My real question here is, is the product resonating in this current environment kind of post-COVID in ways you did necessarily expect? Or would you say most of the performance this quarter was all kind of internal execution? Just parse, how much of the industry is changing and the appetite for Mongo changing versus kind of just internal execution, which again was very strong?.

Well, thanks for the question, Brent. I would say it's a bit of both. I would say that in general, what we're seeing is customers are really gravitating to modern technology stack that allows them to be very nimble, move quickly, innovate fast. And so obviously, MongoDB plays to that strength.

Second; that they do want to focus on work that adds value to the business and basically outsource all the undifferentiated work, so managing a database is not exactly going to give them a competitive advantage.

And third, given our platform offers them a lot of choice with offerings to allow them to run their workloads across the 3 different providers that gives them also more confidence in terms of betting on Atlas. So I think that's one clear dimension.

And then we have actually, I think, as I said in the opening remarks, we put a lot of focus on our go-to-market efforts. In fact, I would say, as much thought and effort we put into our product, we do the same in our go-to-market efforts. And so, what I think you're seeing is, the strong execution on -- across our 4 channels.

And as I indicated in the last question, we have slightly modified. This is just a tweak. It's not a major modification, slightly modified some of the incentives to really make it easy for customers to engage with us and get on the platform quickly. And that's really yielded the results that we've seen..

Certainly, some is working there and working well in the current environment. I guess Michael here just for you as a follow-up. You talked about kind of the COVID impact in the second half and gave a little more color on the tough compare on EA.

But as you think about the pipeline, would you say the pipeline of new business looking out in the second half is also slightly kind of depressed? Or are you assuming just a lower close assumption in the second half pipeline, given all of the uncertainty out there? Just trying to parse out how much of your commentary on the business being impacted in the second half is tied to pipeline or just assumed close rates being lower given all the uncertainty out there?.

Yes, sure. No, totally understand. No, we feel very good about the engagement that we're seeing with customers. But I think in the face of the macroeconomic environment, it makes sense to factor that in. We've got one quarter under our belt fully remotely. And I think we feel really well about how the team has done.

But the situation with COVID-19 and the overall kind of coordinated global slowdowns and openings and whole things is unprecedented. So I'm incredibly proud of how people have adapted. But this is not a playbook where you sort of said it, you've nailed it and then you forget it, there's a lot operationally to focus on.

So very proud of what the team does, but -- and how that we've done. But I think when you look out at the second half of the year it's hard not to assume that the macro won't have an impact..

Very clear. Thank you..

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

Hey, congrats from me as well. Two quick questions; one for the -- if you look at -- like if you kind of start working with larger customers, there's obviously like there's an application that usually kind of sits there and then the Mongo database is the one that kind of powers it then.

And what you see in terms of people's interest? There's a lot of talk about digital transformation, but then with COVID, you have like industries that obviously are not doing so well.

Like what are you see in terms of like then that's kind of interest to kind of do more stuff or realization, we need to do more stuff and then in the fact, like engaging with you on that, I would assume that's kind of a multi-quarter story here that it should be starting to unfold. But I'm just wondering if you see some of that already.

And then I had a follow-up for Mike..

Yes. There's no question that what COVID-19 has done is forced every customer no matter how traditional or critical legacy they were to be digital by default. So whether you're a traditional retailer, you have to quickly build out your e-commerce channel.

If you're in a different type of business, you have to figure out a way to engage with your customers in a digital kind of format and approach. And so that obviously plays to our strength. One, customers can innovate and build very, very quickly on MongoDB. They can also scale it very well compared to all the other legacy platforms.

Two, Atlas becomes very attractive because we take care of all the management of the database and the underlying infrastructure. So that makes it very attractive for allowing the customer to really focus on what's important to them.

And then as I said, multi-cloud plays a big role, depending on what the customer is trying to do, what geo coverage they need, what existing relationships they have with certain cloud provider, etcetera. They have ultimate choice in terms of who they -- what underlying cloud provider to use with Atlas. So all those three things play in our favor.

And I think what COVID has done is really accelerated long-term trends. We're always very bullish about the future. But the long-term trends are clearly accelerating and we're trying to capitalize on it..

Okay. Perfect. That makes total sense. And then one for Mike. Mike, I hear you on the Q4 situation. But if I look at your Q3 guidance, it also kind of looks for kind of flat quarter-on-quarter, which is something we haven't seen.

Is there anything in Q3 on the comps, etcetera or EA that you wanted to point out?.

No.

I think in Q3, the key thing is we've got a very healthy outlook and strong customer engagement, but just a lot of macro uncertainty that we've incorporated into the forecast, which has been consistent with our general approach each quarter is to sort of mark the current state of the macroeconomic landscape as best we can to market and incorporate that into our thought process, but from an overall engagement perspective, quite strong.

And we expect to see an impact on new business that, obviously, particularly with the Enterprise Advanced product has impact in terms of revenue, from term license revenue and we're assuming that Atlas is still expanding at below historic levels, consistent with Q2..

Okay, perfect. Thank you..

Our next question will come from Heather Bellini with Goldman Sachs. Please go ahead..

Thanks guys for taking the question. Just had a couple of quick ones.

In regards to your comments about Atlas and the consumption, you're starting to see existing customer consumption start to come back, is there a sense you could give us for how far off you think it is from where you were pre-COVID? And how long you think that takes to come back? I know that's a tough question, given the macro environment, but I'll start with that one, and then I just had a follow-up..

Sure. Yes. Thanks Heather. I would go back to our commentary on the Q1 call where we talked about it being sort of modest but broad-based and tracking the macro economy overall, where we sort of across region, across sector, et cetera, et cetera.

And that what we said is in Q2 -- in the middle of Q2, we saw a rebound or an improvement in those lower levels that clearly at least to us when you look at all the data and we slice and dice, it indicates that it's tied to overall economic conditions.

It's not quite yet back to historic levels, and it would be very hard for me to predict when or how that would happen.

But I think the correlations that we've clearly seen is it's broadly tied to macroeconomic behavior, which would make sense, given both the broad-based nature of the behavior, but also the broad-based nature of the fact that it's a database application and it's a consumption revenue model, and so all those things should mirror each other.

And that's what we're seeing..

Okay.

And then the follow-up question would be, just wondering from -- if your customers still might be asking for -- if you're seeing kind of request for payment extensions or anything like that or are you doing anything -- anything else creative on kind of top of funnel builds that might be helping down the line? So, I guess, two other ones, sorry..

Yes. No, no, that's fine. So, we saw a very limited and isolated instance of that in Q1, but that has effectively worked its way through, taking care of itself, those folks have come and cleared. And frequency of requests or anything like that has really dried up.

So, we saw a little bit of right as the crisis was for sort of setting in, but it's not been a regular recurring sort of business consideration that we've had to deal with..

Okay, great. Thank you so much..

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

Great. Thanks very much.

Dev, as you think about the evolution of the go-to-market and the acceleration in smaller Atlas customers upfront, coupled with a much broader product portfolio, is there any reason to think that your net dollar expansion rate shouldn't accelerate in coming years?.

Yes. So, I think just to make clear why we're doing that. We have seen Atlas customers grow very, very quickly. And one of the reasons we want to get them on the platform is really condition them so that they don't begin to think about even managing the next new app by themselves.

So, once they get condition on building every new app on Atlas that becomes almost the standard way of people building and deploying applications. So, there's a long-term effect of that. It's hard for me to sit here in terms of what the implications will be on the net expansion rate.

They've always been very healthy and we don't see any potential change to that..

Great. Thanks very much..

Thank you..

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

Yes. Thank you.

Dev, when you look at the database market, we're still seeing good traction for relational products and I'm thinking of like MongoDB, in particular, where do you think that traction is coming from, especially, as the document model seems to be gaining significant share?.

Yes, what I would say is there's really two phenomenons. There's what I call a phenomenon of lift and shift where customers just want to get off the legacy vendor, in most cases, it's something like Oracle, where they don't want to pay the Oracle tax anymore and go to an open source relational database.

And that's what many people call the lift-and-shift phenomenon. Many customers naively believe that, that will allow them to just keep running their business.

What they missed though is that, they missed the opportunity to refactor that application and really modernize it to position themselves to really take advantages -- take advantage of all the new capabilities of a distributed platform and take advantage of other things like micro service and so forth.

And so we have many customers who decide, you know what, rather than just lifting and shifting, we want to replatform and basically choose MongoDB as the solution -- the destination solution.

So, it really depends on -- how quickly the customers want to move their perceptions of how difficult it is to move off the, say, Oracle to a distributed database like MongoDB, how enabled they are versus -- and also how much time pressure they're in.

So, that's why we're expanding our reach, working with systems integrators, working with our partners and obviously, own sales force to get out there and really explain the benefits of MongoDB and the fact that whatever perception they have, we can address to make the choice of making MongoDB that much more easy..

Do you think the current environment will change those dynamics at all in terms of those phenomenon? In other words, maybe move people faster to the modernization of replatforming phenomenon?.

Well, I think when we first came out a lot of people viewed us as an interesting, but niche solution, maybe just use for a certain set of use cases. I think we've clearly shown that MongoDB can serve the most demanding customers anywhere in the world for a wide variety of use cases, and that's only increasing.

So, I think people are recognizing and as I mentioned, all the major players today have had to acknowledge that JSON is the format and the structure that developers like to use that the document model is truly the best way to work with data and the added benefits of our distributed capabilities, it's so easy to scale out using a distributed platform like MongoDB than, say, staying on a relational platform and having to do a lot of gymnastics to get the application to scale.

And so I think it does take time, but we've clearly seen customers recognize and use us for very, very sophisticated applications..

Thank you..

Thank you, Jason..

[Operator Instructions] Our next question will come from Tyler Radke with Citi. Please go ahead..

Hey thanks. And good evening Mike and Dev. Michael I just wanted to start with you in trying to understand the accelerating customer adds here. And it sounds like you did make some tweaks so that your sales incentives to prioritize adding new customers.

But I wanted to just kind of better understand the financial impacts here? I mean, are they -- are you landing customers -- new customers at a lower ASP and then hoping that those expands are higher down the road? Maybe just help me understand that? And then how we should think about just kind of the accelerating new customer adds translating into higher revenue growth -- or how to think through the financial impacts of that?.

Sure. Yes. There are a couple of different factors and flavors of it. You can slice it sort of by channel or you can slice it by product. I'll try to do both relatively quickly. If you look at it on a channel basis, it's really just improvements in the returns from the investments that we're making in the self serve.

Self-serve customers, as you know, come on at $5,000 or $6,000 in annualized spend. And so -- and the unit economics are very attractive of that given the cohort behavior. And as Dev mentioned in their prepared remarks, we're continuing to get better in terms of the muscle and introducing more of the DNA there.

And we've been pleased with the results that we've had, and so that shows up in self-serve customer additions. On the direct sales side, we've also made some sort of refinements to making it easier for customers to use the platform.

And as Dev was mentioning in response to one of the earlier questions, rather than a salesperson being focused on maximizing the magnitude of the initial commitment, we know based on the data and the cohort behavior for Atlas customers that getting them on the platform is the most critical thing because then usage will expand from there.

And so we've decreased some of the customer-related friction in terms of getting folks on the platform, which just makes it easier for people to adapt and then what's getting paid for the consumption over time rather than try to get paid on some maximum initial commitment. And we're also seeing really good success there.

So customers from -- to the revenue question, customers will start off or may start off consuming less. I think from a revenue perspective, it doesn't really matter because even if someone made a big commitment, their initial consumption still is small. And so from a revenue consumption perspective, the dynamics will generally be the same.

It will be different in terms of like how much do we bill upfront or some of those things that aren't areas that we focus on, but there are things that sometimes investors focus on. And so that's one of the other reasons why we call it the dynamic, just so people can understand that..

Okay. And then -- most of what we're talking about, just back to the product view of things.

Most of what we're talking about really is sort of Atlas related and sort of Atlas centered, there's certainly in any given quarter, mix and variability between what the ultimate list of deals looks like in a given quarter, but the piece that we're talking out here really Altas centric?.

Right. So the acceleration is mainly coming from Atlas, which I think we can see in there..

And Tyler, what I would also add is that, it's not lost on us and that in difficult times, most companies gravitate to selling to the existing install base and as we've talked about many times in the past, we do have a land and expand strategy. So our sales force could easily do that.

But we thought just myopically focusing on existing installed base would be a mistake because we do see a big market opportunity. And the added benefit of engaging with them earlier is that, you just condition them to start using Atlas as the default platform by which they build their applications.

So that ends up building a long-term durable relationship with those customers..

Yes, that makes sense. And just a follow-up for you, Dev. I would just love to get your view on Oracle's autonomous JSON service. I know you briefly touched on it in the prepared remarks.

But curious if you have a view on why you think Oracle introduced the service? Like do you think it's in response to greater competitive pressure that they're seeing from you guys? And then, I would just love to hear if you have a view on the pricing claims from Oracle that it's 30% cheaper?.

Yes. Sure. So, a couple of points. One, they provide a support for JSON in 2014, but what they recently announced was support for JSON on their autonomous database in the cloud. One, it only runs in their cloud. Two, much like what Microsoft did with Cosmos and AWS DocumentDB, it's really built on top of a relational database.

So it's basically a shim that basically tries to allow developers to more easily use JSON, but the back end is basically the same old engine. And so, there're some severe feature limitations. One simple example is that, because it's basically a JSON blob, you really can't even parse numeric data. It's all basically text.

And so, there're some severe limitations in terms of how you can use those features. And obviously, because it's built on a relational back end, there's also a huge set of implications around performance.

To the latter part of your question, this is really in response to the fact that developers are recognizing and are acknowledging that it's so much easier to use JSON or by definition, documents to work with data. It's so much easier to code. It's so much more natural. It's much more intuitive. It's much more flexible.

And Oracle basically acknowledged that. And so, we believe that, as the world moves more and more towards using documents, we are well positioned. And, obviously, we've been competing with clones for quite some time, and I think we've done quite well..

Thank you..

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

Hi. Good afternoon. Thanks for taking my questions. I want to ask a couple of product questions.

First, I was curious if you could talk about what you're seeing in terms of the uptake of Search so far within your customer base? And any context around changes in consumption patterns?.

Yes. So, just so we're clear, we made these products generally available in June of this past year. And so it's very, very early days. We're quite excited about the uptake so far.

And the reason, just to remind everyone why we introduced Search, is we actually had customers telling us, we much rather stay on one platform than to have to go learn, build and maintain a separate platform.

And our Atlas Search product is obviously fully managed as well and takes -- you can take advantage of all the features like [indiscernible] that you could before with the regular database server. So it's still early days, but we're very pleased with the results to-date.

And as we get more focused and attention from the sales force on this, we feel quite good about the trends of the business..

That's great.

And then just as a follow-up, how should we be thinking about the monetization opportunity around Realm? And just trying to get a sense for what proportion of your customers do you think need those -- the full capabilities between Realm and with the cross-sell with the Atlas?.

Yes. So the reason we acquired the Realm mobile database and now have built a tight coupling between the mobile front end and the Atlas back end is to really enable developers to take advantage of a much more powerful format. Realm's architecture is very similar to the MongoDB architecture.

Mobile developers find very, very useful to use the Realm mobile database. Realm itself is not meant to be a revenue generator onto itself. It's really in to enable mobile developers to think about using Realm and Atlas first because allowed it to move that much more quickly.

So, what you'll see in terms of revenue impact will be more on the Atlas consumption at the back end versus like us trying to monetize the front end.

Typically, the mobile database, the client side is given away for free and our approach is to really enable developers to build very, very sophisticated applications and one of the key features, Realm Sync, which is still in beta, really simplifies the work a developer has to do to be able synchronize data between the client side and the server side.

As you can imagine, with people using mobile devices, or other devices that are not tethered to a direct network, there's always a chance that you could be offline and so being able to quickly synchronize data between the two -- between the front end and the back end become very, very important and developers have to incur an enormous amount of complexity and cost to be able to do that manually.

And so offering this capability will make our capability will make our developers' life that much more easy and will make our platform that much more compelling..

Got it. Thanks for the color and congratulations on the results..

Thanks Jack..

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

Great. Thank you. This is Joey Marincek on for Pat. Dev, just one high-level one for you. I want to touch on the employee engagement survey, you mentioned how do make MongoDB a place people want to work at and then keep them engaged, especially in the current work-from-home environment? Thank you..

Sure. Well, thank you for that question. I mean, for a business like MongoDB, our success is directly correlated to our ability to attract and keep great employees, both on the product and engineering side as well as on the go-to-market side and obviously, as well as the people who support the entire business.

And so we were very intentional when COVID-19 happened to really be very transparent with employees about what we're doing. Now, candidly, we were in a very healthy financial position. And while we did worry that there might be some short-term impacts to the business, we weren't changing our posture or potentially laying off anyone.

So, I think there's two questions that have impacted anyone in COVID. One, can you -- do you still have a job? And two, can you do your job safely? Those two questions at MongoDB have been an unequivocal, yes.

And more importantly, we really communicated to all our employees about making sure they were clear on their priorities, making sure that our leaders were clear with their teams about what was important, making sure that they understood where we're going in terms of what we're trying to do, making sure that we made it very easy for them to work in from a work-from-home environment without much disruption.

And we've also been sensitive to the fact that working from home for many people is very challenging, especially if you have young kids at home or you don't have ample private workspace at home. And so we've been very flexible with employees to make sure that they can take the time off, work flexible hours, et cetera.

And I think we are also really live our values. And that's another way of saying, we really try and create a culture where people feel like that this is a great place to work that they're respected, no matter who they are, that they can not just have a job, but a career, and that we want to set them up for success. And so we tried to do that.

We're very grateful for what our employees have done since COVID. Our results are, obviously, a reflection of that, and we've been hiring aggressively. And so we're very focused on on-boarding those new employees to make sure that they get quickly inculcated into the culture..

Awesome. Thank you. Congrats..

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..

Thank you, and thank you for joining us today. I just want to wrap by saying that, I'm really proud of the strong execution this quarter in a difficult macro environment. We've also expanded our product portfolio to really increase our lead as the preeminent to the data platform on the developer.

As we discussed, we've had a record direct and self-serve customer additions, demonstrating that our strategy of adding new customers is working. And lastly, we're pursuing a big market opportunity and COVID is only accelerating long-term trends. So thank you for your time. And we'll talk to you soon. Take care. Bye-bye..

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