I went through the MDB conference call transcript and will highlight some quotes below.
https://seekingalpha.com/article/4204388-mongodb-inc-mdb-ceo…
customers can easily comply with the ever-changing and increasingly demanding regulatory environment for managing data like Europe’s new GDPR rules. This is a big competitive differentiator for us, as it is incredibly challenging, if not impossible for companies to orchestrate these types of sophisticated data policies with legacy databases.
GDPR is a big topic in the compliance world, so nice to see MDB capitalizing on this.
During the second quarter, we added a number of new enterprise customers including Canon USA, Coinbase, Monotone [ph] International, IPC Systems, Royal Caribbean Cruises and Service New South Wales. We also expanded our relationship with customers such as Apervita, Cisco, Fresenius Medical Care North America, HSBC, Maple Leaf Sports & Entertainment Partnership, Squarespace, the Bank of Nova Scotia and Click Deck [ph].
As we expand the functionality of the MongoDB platform and build deeper relationships with our customers, we are seeing those customers turn to MongoDB to support an ever increasing variety of use cases.
Some very nice wins this quarter and expanding revenue with current customers.
In addition to offering lower operating costs and improved development velocity, a key attribute of Atlas is that it provides elastic capacity for customers when they experience spikes in usage for their applications. There is a particularly strong product market fit for Atlas with customers who have a cloud-first strategy, which enables our sales reps to sign more deals, bigger deals and quicker up sales within this market segment, which all contribute to meaningful productivity increases.
During the quarter, we introduced many of the premium features of Enterprise Advanced into Atlas, including sophisticated new security features like encryption and key management, LDAP integration and database auditing. We also introduced a secure Atlas environment for healthcare customers that is fully hipaa compliant.
We expect the introduction of enterprise features in Atlas to be a catalyst for our sales organization. With enterprise features, Atlas can now serve the needs of the most demanding and sophisticated customers who want to consume MongoDB as a service.
From the Q&A: So for those customers who have those extra level of security requirements, it really enables them to feel very comfortable of moving their workloads to the cloud on Atlas. And so it really expands the, what I’d say, the addressable market of Atlas, and allows customers to just be more and more comfortable of going to the cloud, using MongoDB Atlas.
Lots of positives with Atlas and more benefits should lead to continued high growth.
MongoDB 4.0 included far more than ACID transactions. I would like to call out a few of the highlights. Stitch, our new serverless platform, is now generally available. Stitch makes it easy to build modern cross platform applications on MongoDB without developers having to do the tedious work of managing the back end of an application. With Stitch, the app server is no longer required and developers can use the MongoDB query language directly from front end code as well as to connect to third-party services. Stitch will dramatically increase the velocity of development, while allowing teams to focus on only value-added code.
We announced the beta of MongoDB Mobile, which will extend the power of MongoDB all the way to the network edge on IoT assets, as well as iOS and Android devices. MongoDB Mobile enables real time automatic syncing of data between the device and the back-end database, which will significantly enhance development velocity and application performance. To support our mission of giving customers the freedom to take advantage of an on-premise hybrid and public cloud infrastructure, we have also introduced a new MongoDB Kubernetes operator in beta. This solution will support provisioning and orchestration of MongoDB within a Kubernetes environment.
We are incredibly proud of the innovations introduced in MongoDB 4.0 and we believe it will significantly raise the bar for the value we deliver to customers. With 4.0 successfully launch and generating significant customer interest, our engineering team is already hard at work, executing on the robust product road map we have laid out for the coming years.
MongoDB 4.0 was a huge upgrade with a lot of added functionality leading to more demand.
During the second quarter, we grew our customer base by approximately 800 customers, bringing our total customer count to over 7,400 customers, which is up from over 4,300 customers in the year-ago period and over 6,600 customers at the end of last quarter. The growth at our total customer count is driven largely in part by Atlas, which had over 5,300 customers at the end of the quarter compared to over 4,400 customers at the end of the first quarter.
Our net AR expansion rate in the second quarter remained above 120% for the 14th consecutive quarter. We ended the quarter with 438 customers with at least $100,000 in annual recurring revenue and annualized MRR, which is up from 394 in the first quarter and 296 in the year ago period.
Even among our largest customers today, we believe MongoDB comprises a small fraction of their total database spend, which represents a large and attractive growth opportunity for us over time.
Nice to see them added 800 customers during the quarter and maintain their 120% expansion rate as the land and expand strategy combines into very high growth.
The increase in our cash balance reflects the 254 million of net proceeds from our successful convertible notes offering in June. These notes are due in 2024 and have a coupon of 75 basis points. We entered into capped call transactions that raised the effective conversion price of the notes to $106.90, a 100% premium to our share price at the time of the transaction.
Nice to see the notes won’t be dilutive until the stock passes 106.90 (which may be sooner than we think).
Operating cash flow in the second quarter was negative 16.9 million. After taking into consideration approximately $1.2 million in capital expenditures, free cash flow is negative 18 million in the quarter. As a reminder, the second quarter is typically the low point in the year for operating cash flow, due to seasonally low collections and the second quarter is usually our heaviest investment in marketing events like MongoDB World. In addition, in the second quarter, we began to incur capital expenditures associated with our New York City office move, and we expect to see capital expenditures in elevated levels in the third quarter as a result.
The large negative cash flow was a big negative for me, so nice to see that there are seasonal and unique factors this quarter making it worse than normal.
Short-term deferred revenue was 125.5 million, up 44% year-over-year, while total deferred revenue of 145.8 million was up 38% year-over-year. We believe longer-term trends in deferred revenue are directionally correlated to the underlying momentum of our business. That said, as Atlas continues to become a larger portion of our business, it is important to appreciate that it is a usage based model and does not generate meaningful deferred revenue.
The lower deferred revenue was a little concerning at first but makes sense given that there is little deferred revenue for Atlas which is becoming a more meaningful part of revenue.
…with regards to IBM, our relationship with IBM today does not include Atlas. And so it is designed for our on-prem enterprise advanced product. In terms of AWS, well, AWS has really helped on the demand fulfillment side, because customers can choose to procure Atlas to their marketplace program and so what it allows a customer to do is really reduce the friction in the process of basically procuring Atlas when they decide that MongoDB is a preferred choice.
We also do obviously participate in a number of AWS Summits around the world. Obviously, they tend to bring lots of people, especially developers to these conferences and we view that as an opportunity to basically speak about what we’re doing with MongoDB and Atlas in particular.
Nice to see them leveraging AWS to drive sales.
So, our strategy, one of the key differentiating points about MongoDB is really give customers the freedom to run their workloads anywhere. And today, we have customers who run MongoDB on the mainframe. We have customers – we have lots of customers who run it on-premise and as you can obviously see with the Atlas results, we have lots of customers who are now consuming MongoDB as a service. I should also say we also have lots of customers who buy Enterprise Advanced, but self-manage it in the cloud as well.
So, we literally run the gamut of all the variety of options and we just believe that it’s important to give customers choice. Every customer is at a different stage in their journey to the cloud. We have lots of government agencies, who are very, very careful and frankly cannot use the public cloud infrastructure today. We have lots of financial services customers, who for regulatory reasons, cannot use the public cloud today and so, we address their needs through our capabilities on-prem, and then we have lots of other customers even large enterprises to emerging startups, who are moving either select workloads or the entire business to the cloud, and having that choice really allows us to serve in a wide spectrum of needs.
In terms of directionally, we clearly see everyone is on some journey to the cloud. So, we see the cloud becoming an increasingly important part of the business for MongoDB. Obviously, the Atlas results speak for themselves. The other advantage I think that we give customers is not just freedom to run the cloud, but to run on any cloud provider. And so, one of the things that we hear and we see a lot of enterprises do now is try and work with multiple cloud providers. They may have a primary and then a secondary, and the comfort they have going with MongoDB is that it’s very easy to move applications from one cloud provider to another cloud provider. So, they don’t have to worry about being locked into any one particular cloud. So, that’s another big advantage of using MongoDB.
MDB gives its customers the optionality to run their workloads how they want. Also nice to see the comment on the growth of cloud.
the company was basically founded to make a developer’s life really easy. To really let developers and organizations move very, very quickly and being able to develop applications that drive the business. And what basically serverless does for us is that it really allows developers to avoid all the mundane and tedious back end work that they normally have to do and basically only focus on value-added coding. And that becomes really, really important, because as customers and specifically developers think about what platform to use, they’ll naturally gravitate to platforms and make their lives significantly easier.
So MongoDB’s popularity was driven by the fact that the document model and our approach just makes a developer’s life so much easier by giving them a very easy way to work with data, by making it very easy to move and put data where you want it from a scalability, reliability, availability point of view, and Stitch just takes that next level where they can basically not have to deal with all of the backend TDM work they have to do to build any web or mobile app.
And so what Stitch does is allow you, for example, to essentially expose the power of a database through front-end code where you can basically create a database from the client side. It allows you to easily integrate to third party services whether it’s a payment service like Stripe or a notification like Twilio or even a third party service, an internal third party service that you may have.
With Stitch now, you can use Stitch to sync data between your mobile device with MongoDB Mobile to the back end. And there’s even things like with triggers or what used to announce previously with change streams, you can now easily enable the ability to take action on events or changes in your database. So when you think about where the world is going, JSON is becoming the synonymous with the word modern applications. MongoDB is the pre-eminent JSON database and Stitch basically, you should think about Stitch as really the lubricant that allows people to move very, very quickly and faster in building applications.
MDB makes its products very user-friendly making customers want to use their products more and more.
So containers, basically, the world is moving to containers because it’s just an easy way to manage infrastructure. Kubernetes has become the de facto platform that everyone is gravitating to. There were a few other options a few years ago, but Kubernetes has become the standard. What we have done is basically create an operator for Kubernetes where people from the Kubernetes platform can basically manage provisioning and orchestrating and basically migrating databases on a kind of a containerized environment. So, that makes – so customers are incredibly excited about that, because as people move to containers, it becomes as easy to manage MongoDB, because we support those containerized environments.
Nice discussion on containers and relevant for us PVTL shareholders.
Heather Bellini
Right. And then just the competitive tier kind of with all this that you’re putting out there, have you noticed a widening in your weed? Any comments on kind of the competitive universe that you could share?
Dev Ittycheria
Yes, I mean, we do not frankly see other NoSQL vendors in deals anymore. I mean, I’m sure that they’re getting deals, but we frankly see them less and less. I can’t remember the last time, I had a sales rep complain to me about a competitive situation with another NoSQL competitor. I think it’s become clear to everyone that we have become the de facto leader in the modern database space and now customers are just contemplating what workload should they move to the cloud and what new app should they build on MongoDB. And that’s where our salespeople are spending the most time.
Good to hear that Mongo is now de defacto DB. With MDB’s market cap under $4B, MDB has a long way to go.
there’s two parts to our Atlas business. It’s our self-serve business and our sales-force [ph] business. Our self-serve business, we started first and we got a lot of traction very, very quickly. And for the last, I would say, year, have been really focused on enabling our sales force to drive Atlas deals and those deals tend to be significantly bigger than the self-serve deals. And so we’re seeing – we’ve seen material progress and growth on the sales side.
Nice color on Atlas sales growth
we really consider the ability to raise capital last quarter as really opportunistic. We didn’t have any kind of near term kind of needs to use that cap – deploy the capital for either M&A or any other kind of operational needs. We just found, saw an opportunity to raise a lot of cheap capital. It clearly allows us to be more aggressive, should the opportunity arise. But right now, we have no near-term pressing needs to use that capital.
Happy to hear that the capital raise will not be wasted on a bad acquisition and was more opportunistic as they have enough organic revenue growth to focus on.
Jack Andrews
Dev, on the last earnings call, you talked about – you referenced some 20 plus conversations you were having with C level executives in terms of just the increasing strategic importance of MongoDB. I was wondering if you could kind of update us on the amount of conversations you’re having and just what is the – where are those conversations leading today?
Dev Ittycheria
I would say that those conversations are frankly increasing. We have changed our sales methodology, where we’re asking our sales people once they do sufficient kind of homework on an account to go high in the implementation as quickly possible for a number of reasons. One, to qualify where the real demand and interest is in kind of potentially using MongoDB. Two, to kind of educate those senior level stakeholders on our differentiation and value proposition. And three, to basically increase the velocity of business, even if you get a deal, if you have the air cover, it’s much easier to go and ask for the follow-on deal because the senior level stakeholders are now fully aware of the value we can add. So, now, we’ve changed our engagement model where we’ve kind of institutionalized that where we try and get high very early in the sales process and that’s starting to pay big dividends for us.
Good detail on sales strategy and increased customer conversations.
Brent Bracelin
Thanks for taking the question. Dev, maybe for you, I wanted to go back to the quarter. If I look at just the revenue growth, 61% growth is the highest we’ve seen here in two years, on a sequential basis, 19% growth is the highest we’ve seen also on record here in the last couple of years. So my question is why now? Why are you seeing this acceleration in the business? Is it a confluence of internal factors that are driving it, even if I look at the MongoDB business, ex Atlas, it also accelerated? So walk us through why you think this is happening? How much of it is kind of company-specific things you’re doing internally versus just the external factors and the market being kind of ready for a more modern database?
Dev Ittycheria
Thank you. So we do feel good about our position. We do feel good that every quarter we’re getting more and more credible with customers and being really the default modern database for all the use cases. We do feel like, we as an organization are executing better. We’re getting – the efficacy of our go-to-market efforts are just getting better. We are expanding to different regions. We also think the product road map and product execution has been incredibly strong, and so we feel very good about, not just the core product, but obviously Atlas has grown really, really quickly. We’ve added new features and capabilities. We’ve rolled out new products like Stitch and Mobile. So we feel like it’s not one thing.
I would also say and Michael talked a little about this in his prepared remarks, there were some one-time events that happened, I would say, in Q2 that we just didn’t expect. So I wouldn’t want you to extrapolate that this is the new normal. But we obviously feel very good about the state of the business and the trajectory of the business.
I assume they are being conservative and trying to not raise revenue estimates too quickly. We’ll see next quarter.
The level of conversations and the tone of conversation has changed radically since we announced support for ACID. And so I think it’s taken off the potential objection people had, is that could they really use us for certain use cases where ACID type data guarantees was required. And so it’s really helped change the nature of the conversations and we feel like it’s only expanding the aperture of use cases we can go after.
Great to see the benefits of ACID
So Atlas is the most widely available database or service offering. Today, I believe it’s available in like 57 different regions. No other database or service vendor can claim that because of the virtue that we can run across Amazon, Google and Microsoft’s real estate. And so, in terms of geo-coverage, we are the most widely available offering. And so we tend to have customers almost across every industry, nearly every geography using Atlas in some way, shape or form.
Nice to see the broad availability of Atlas.
I would say the antipathy towards the legacy vendors has never been higher. So we do see customers very, very motivated to move off their legacy platforms as a function of their relationships with those vendors. And so that’s one big reason.
The second big reason is that the architecture of these legacy databases is frankly old. The relational database, the first white paper came out 50 years ago and Oracle was founded 41 years ago. And so, yes, they obviously add lots of features and capabilities. But if you want a very modern platform that allows you to scale gracefully, that allows you to add features very, very quickly, that allows you to move data easily all around the world to serve your user base, you can’t really do that easily on a legacy database.
And so when you look at like the computer science programs that the leading colleges have, MongoDB is one of the most popular technologies that students develop on today. I had one customer state publicly at MongoDB World that once you go MongoDB, you can’t go back. So the MongoDB is a much more compelling platform to build applications on than relational databases. And so until we see that happening as well, that’s a big driver to why customers are going with MongoDB.
Good discussion on customers moving away from Oracle to MDB.
Overall, this was a great quarter again highlighted by accelerating revenue growth and Atlas taking off. This is a long term hold for me.