Snowflake and MongoDB

[ronjonb]

Well the weekend is almost here and it’s always a good time to relax, reflect and plan. So let’s get started…

Snowflake

Nothing has changed about my conviction in Snowflake since the time I bought my first shares in 2020 soon after their IPO at around $240. The price did look silly or probably insane at that time but the product they offered and their story looked very compelling to me. Fast forward almost 1.5 years now; today my conviction in Snowflake is even stronger! It was my smallest position at the end of 2020 at around 5% and today it’s about 18%!!! Competing for the 2nd place with Zscaler which is behind only Datadog!

Well, during that time ( in 2020) I had written this post since Snowflake was not a very well known name…

"…I won’t be selling my SNOW shares unless I see a competitor come up with a better solution. Right now I don’t see any on the horizon. This also somewhat explains why their net revenue retention rate is 162%.

As someone rightly said “data is the new oil” and I say “you need refineries to process that crude into more useful products”. That’s what SNOW does with all that data. I may keep adding on dips as it’s currently sitting at the bottom of my portfolio at around 5% ( after the 61% rise)….”

When I bought my first Snowflake position, a lot about their technology was not clear to some new investors and I had posted some information to help our board members/visitors understand “what Snowflake does” ( no pun intended).

Here’s the post ( which was highly recommended and appreciated) if you are interested in reading…

https://discussion.fool.com/following-up-on-my-last-replyand-hap…

And I also had made another bold prediction that Snowflake would probably be my largest holding in the next 2 years. We’ll it’s almost there now in less than 2 years at about 18% of my portfolio!

As we head in to earnings, I’m quite optimistic that we are going to see great results again.

Earnings Date: Fourth Quarter and Full Year of Fiscal 2022 on March 2, 2022

Here’s some recent positive news from the Company.

”…the Data Cloud company, today announced Snowflake maintains a perfect Recommend score in the 2022 Wisdom of Crowds Analytical Data Infrastructure (ADI) Market Study, and is ranked as an Overall Leader in both Customer Experience and Vendor Credibility. One hundred percent of Snowflake customer survey participants said they would recommend Snowflake to other organizations, for the fifth consecutive year. The ADI report is published annually by Dresner Advisory Services, LLC…”

”…the Data Cloud company, today announced it supports compliance with the International Traffic in Arms Regulations (ITAR) through the Directorate of Defense Trade Controls (DDTC). ITAR is a set of US regulations and controls related to the import, export, and re-export of defense-related articles and services, including technical data, as promulgated through the United States Munitions List (USML)….”

Here’s another bold prediction I’m making today: I strongly feel that 2022 will be the year of data collaboration! and Snowflake should do really well to gain from the upcoming growing trends in data science, data engineering, data governance and data sharing!

MongoDB

I’ve also been harping on MongoDB (MDB) in the recent past as I see a great potential going forward. I had owned MongoDB in the past a number of times but kept selling in favor of other higher growth names. However it was always on my radar and during the recent tech carnage I could not ignore MDB any more. Here are my 10 reasons why I own MongoDB.

1. MongoDB is being extensively adopted across enterprises and startups as enterprises want to stay competitive and startups want speed.

2. I’m quite convinced that Mongodb Atlas, the Cloud-Native Document Database as a Service is a game changer. It’s cloud agnostic; supports AWS, Azure & Google Cloud, including multi-cloud clusters spanning all three cloud platforms.

3. I have pretty high confidence in the CEO Dev Ittycheria ( a lot of credit goes to him for turning around the company in the past few years).

4. Once customers use MongoDB, they’ll likely stay for a long long time! Churn in database is usually very low.

5. I think the Oracle Database API for MongoDB is in a way a validation for MongoDB.

6. A behemoth like Amazon tried to beat MongoDB with their DocumentDB but bowed out.

7. Gaming, Esports, App developments will provide huge tailwinds for the foreseeable future.

8. Great choice for IoT Platforms.

9. IDC Predictions ( this is great for both MongoDB and Snowflake). As per IDC, the DB market is going to be $121B+ by 2025. And by 2023 over 500 Million Digital Apps and Services will be developed and deployed Using Cloud-Native Approaches! Also IDC predicts digitized data will hit 175 Zettabytes in 2025! That’ll be a Huge Explosion of data. MongoDB is undeniably the best database solution for big data (text, audio, video, geospatial, 3D). So, things are still early and kind of just getting started!

10. Lastly but most importantly, they cater to the most scare resource and their biggest evangelists aka “Developers” who generally drive the adoption and success of a technology such as a database technology.

Risks:

1. Nothing is guaranteed in the tech world ( except continuous innovation and staying ahead all the time ) and Database technology can change. Some other disruptor can come along or there may be a better way to build apps in the future. Right now I don’t see any other compelling NoSQL competitor.

2. The behemoths ( Microsoft, Amazon, Google) may come out with some offering that poses threat. Again, I don’t see that right now.

I like MongoDB enough to have built a 8% position but don’t see it taking over my top three ( Datadog, Snowflake and Zscaler). When Databricks IPO’s that’ll be another story for another day

Good luck to us all and Happy Weekend!

Cheers!

ronjonb ( https://twitter.com/ronjonbSaaS)

P.S. And I was part of the team that worked on SQL Server 2012 while at Microsoft and now am actively using MongoDB for a couple of my projects. So, am seeing both sides of the world

[bnh91]

Ron,

You forgot the most important risk that is the only thing the market cares about right now: valuation.

Stocks who have reported blowout earnings past anyone’s expectations are at basically the same level prior to their reports (see DDOG, valuation is too high even with blowout results)

NET has a pretty good report beating expectations with their best guidance in the public lifetime and the stock is -17% from their report. Valuation problems.

What’s going to happen to SNOW even if they blow everybody’s expectations away? Flat stock price then continue down with the constant bad macro news that never seems to fully discount? Valuation risks.

How about MNDY/MDB if there is a single thing that looks off in the reports? -20-30%?

I thankfully have been able to hedge some of my positions in these companies during this relief rally, but owning these things is starting to feel like fighting gravity (FED draining liquidity from the market). I took a loss on half my medium sized MNDY position today, the risk of a AMPL like situation is not worth it to me. I put some into SNOW, but the rest I will use the weekend to think about. Have a good weekend

Bnh

[catsunited]

Hi Ronjobb,

Thanks. I love the MDB product and the investment narrative. MongoDB is the most popular NoSQL database by any measure with amazing developer loyalty; while the alternatives offered by the hyperscalers and open-source options are currently nowhere as good as what MDB offers. However, I do have questions about their numbers, and really appreciate your (or any one else’s) comments:

1. with a run-rate revenue of $870 mil, it is no longer tiny and sub-scale. So why is its free cash flow (FCF) generation so poor? I practically see no improvement in their FCF generation (still negative) over the years as it scales; and it has only barely broken even at the operating margin level. This makes me worried about their unit economics.

2. What is the reason why the customer net adds have stalled across all categories in recent quarters - all customers, large customers (>$100K ACV) and Atlas Cloud customers?

                       
Net adds:               20/11       21/01        21/04      21/07       21/10  
All customers           2,400
>100K ACV customers
Atlas

Again, I really want to commit capital to MDB as its products have very general application and the runway is one of the longest in the SaaS space; but the above 2 questions are giving me pause.

[catsunited]

Oops I accidentally clicked submit before completing the table above:

Net adds:               20/11       21/01        21/04      21/07       21/10  
All customers           2,400       2,200        2,000      2,200      2,000
>100K ACV customers      79           77           82         69         75
Atlas                   2,300       2,200        2,000      2,200      2,000

Do keep in mind that their total customer count of 31,000 is still quite low compared to what I think is the full potential for this kind of wide application product; so why should net adds be stalling?

Cats

[ronjonb]

Hi Cats, You bring up some very nice points but I’m not a numbers guy and not qualified enough to answer your question. I hope someone on the board may be able to answer it and there’s a chance that some analyst may ask that during the earnings call. I’ll wait for that.

My investment decisions are mostly driven by these 5 rules ( not in any particular order) and they have paid me back very well so far!

1. Cloud Native
2. SaaS
3. Mission Critical ( this also determines the Moat)
4. Revenue Growth & Net Revenue Retention
5. Knowing the Pulse: What I learn from interacting my tech friends who are working in a wide spectrum of companies from the biggest to startups mostly in the Bay Area, Seattle and some other locations. And of course my own experience in the Software industry.

Cheers!

ronjonb

[HorsePlayAndrew]

This post had me intrigued to start diving into the numbers.

The revenue is very interesting. We are witnessing significant reacceleration.

Q1 39%
Q2 44%
Q3 50%
Q4 ? This is the best bit. They guided for $242(high end). That would be 42% growth but take a look at the trend in their beats…6%, 9%, 11%. Another 11% beat would see them hit $268 in revenue, 55% YOY. However, last year, their Q3 beat went from 9% to 7% in Q4 and the earnings call in Q3 2022 highlights some headwinds for Q4 and Q1 so I don’t think we’ll see an 11% beat, maybe something close though.

The QOQ growth would look like this:

Q1 6%
Q2 9%
Q3 14%
Q4 15%? TBD

Atlas has always been viewed as the potential company maker, and in Q3 2022 grew 84% year over year, representing 58% of revenue, it has come a long way. It was 61% year over year, 47% of revenue back in Q3 2021. I’ve read the Q3 earnings call and the tone is very bullish on the enterprise opportunity ahead and the growth of Atlas.

I’m watching very closely here but would welcome any critique or thoughts on the numbers above.

[HorsePlayAndrew]

Sorry I forgot to include a link to SSI’s amazing MDB write up:

https://softwarestackinvesting.com/mongodb-q3-fy2022-a-broad…

[XMFRob]

Atlas has always been viewed as the potential company maker, and in Q3 2022 grew 84% year over year, representing 58% of revenue, it has come a long way. It was 61% year over year, 47% of revenue back in Q3 2021. I’ve read the Q3 earnings call and the tone is very bullish on the enterprise opportunity ahead and the growth of Atlas. – HPA

I bought MDB because of Atlas… and how the numbers play out with it.

Atlas seemed like a small part of MDB until a year or so ago and now (if you will) it is the tail that wags the dog. So far, folks seem to have concentrated on the relatively modest 40%-50% growth of the overall company (seems ridiculous to call 40%-50% “modest”, doesn’t it? LOL) and have ignored the accelerating growth of Atlas.

Well guess what, folks?

Atlas is big enough now to cause a steady and rapid rise in the overall growth rate: 39%, 44%, 50%… HorsePlayAndrew hopes MDB will report 55% for the recent quarter but thinks that might be too ambitious. Due to the strong Atlas growth, his suggestion seems quite reasonable to me.

I doubt MDB will become a favorite on this board because the growth is merely fabulous instead of stunning. But it seems to have a long, long runway in front of it and can be viewed as a reliable grower that doesn’t need constant attention for the investor to avoid some sort of debacle in the reporting. Debacles in the overall market are still alive and well… LOL.

Disclosure: I have shares in 17 companies. Five of those have less than a 1% share. Only a few are 5%+ of my portfolio. MDB is only 1.2%. That’s a small bit, but I still view MDB as very worthwhile.

Rob
Rule Breaker Home Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

[poffringa]

Long time reader, first time poster. I am the voice behind Software Stack Investing (Peter Offringa). Since my blog post was referenced, I figured this would be a good opportunity to comment on this board. I have benefitted from the insights and knowledge on this board for a while and appreciate the promotion of some of my blog posts. So, if you will indulge me, I figured I would give back some perspective to this community. As time allows, I will try to post periodically to this board going forward.

Regarding MongoDB, I think other analysts have done a great job summarizing the drivers behind MongoDB’s increasing momentum over the past year. I also echo ronjonb’s comments. I won’t rehash the financial metrics, but can help add some perspective on where I think their product offering is evolving and why I think this could represent an inflection point for MongoDB. I look at this through the lens of changes over the last year in the demand environment, application architecture, the developer ecosystem and MongoDB’s own product positioning. This is detailed further in the referenced blog post, but I’ll provide a condensed list of bullet points here for your convenience:

• Custom application building. I think the idea of digital transformation is well understood. Enterprises are increasingly moving business interactions to digital channels. As they want to differentiate their offerings, this trend is resulting in many custom-built applications. Mobile and web apps need a transactional database behind them.

• Developer talent shortage and a drive for efficiency. Developer cycles to build these custom apps are in short supply. Anything that reduces the time to build an app is embraced. This is causing an acceptance of non-relational data stores. Why? Because relational models don’t map cleanly to how data is modeled in apps, which are usually object-oriented. A document store more closely resembles how data is managed in an app, eliminating the translation overhead from object to relational (called an ORM layer).

• Microservices and purpose-built data models. Large monolithic applications have been getting sub-divided into compact microservices. New apps usually start with a set of services. Microservices lend themselves to purpose-built databases, one for search, key value, document, graph, time series, relational, etc. This drove the explosion of database vendors, each offering a distinct type of database. However, while development teams get the benefit of data model relevance, that data is silo’ed into many platforms, each of which has its own access interface to learn, security options, hosting configuration and pricing terms. There is an emerging argument for some consolidation - keep the disparate data models, but support them on a common vendor platform.

• Hyperscalers cooperate instead of compete. AWS, Azure and even GCP are now cooperating with the leading providers in several software infrastructure segments, where even 2-3 years ago, they only offered competitive products. Examples of software infrastructure companies seeing this new cooperation include Datadog, Snowflake, Confluent, Elastic and MongoDB. The change in tenor occurred when these vendors built their cloud offerings on top of the hyperscaler infrastructure. Now, AWS and the like make money from the compute/storage used by these vendors. In many cases, they have decided that marketplace revenue has better margins than spinning up their own competitive offerings. Or, they are comfortable letting internal teams compete with each other (AWS is well-known for doing this).

With these trends, here is why I think MongoDB is well positioned to benefit at this point:

• Licensing model and cloud-hosted solution. Several years ago, MongoDB changed the licensing model for their open source solution. This prohibits the hyperscalers from hosting the open source product for revenue. Where a hyperscaler does offer a hosted version, it is either pinned to an old version of MongoDB or forked. The feature set no longer matches what is available from MongoDB’s latest version. Additionally, like other software infrastructure providers, MongoDB offers a cloud-hosted version of their software in the form of Atlas. The introduction of the cloud offering really marks the inflection in MongoDB’s growth. Now, development organizations can pay for a hosted version of their database software, available on all the major cloud providers. Additionally, the use of Atlas includes features and benefits not available in the open source version. These all likely contribute to Atlas’ significant year/year growth of 84% in the most recent quarter.

• Multi-cloud. MongoDB Atlas supports data sharing across all the cloud providers. This provides a unique advantage for any organization that runs applications on multiple cloud vendors and wants to easily share data between clusters.

• Expansion of use cases. With the announcement of their Application Data Platform in mid-2021, MongoDB expanded the number of data workloads that their platform could address significantly. While their previous focus was to capture all document-oriented data storage (or convince relational workloads to migrate), they now support all major data models, including relational, time series, key value, search, graph, wide column and caching for mobile apps. In theory, this allows developer organizations to consolidate all these workloads onto a single vendor, with the benefits of a single interface, security configuration, DevOps management and pricing terms. This expands MongoDB’s portion of the addressable transactional database market significantly.

• Talent influx. In the last year, MongoDB has attracted some well-known players in the database industry. If we agree that talented employees are generally attracted to the leading companies, then MongoDB seems to be increasing their appeal. The new CTO Mark Porter is a long-time technology leader in the development of databases, having led teams at Oracle and AWS in the past. The new CMO was previously the Head of Enterprise and Developer Marketing at AWS. MongoDB’s new head of developer relations, Rick Houlihan, was at AWS for the last 7 years and is the self-described inventor of DynamoDB (AWS’ NoSQL offering). Rick is active on Twitter and is very vocal about why he thinks MongoDB’s offerings are superior to those of competitors and even AWS.

With this foundation, I will be looking for further revenue acceleration in the upcoming quarterly report. I also would like to see growth in large customers, as I think the ratio of large customers to total customers should be higher than 4% (Datadog is at 10%). High revenue growth from Atlas should continue to exert an upward pull on overall revenue growth, as it now contributes over 50% of revenue.

The concerns around customer additions are fair. Adding 2,000 customers a quarter is robust, but the sequential growth rate is decreasing. Datadog had been exhibiting a similar trend until the most recent quarter. In their case, large customer growth is driving revenue growth. I would like to see the same from MongoDB. With the broader platform offering, there is more room for customer spend expansion. On FCF, I too was frustrated by the lack of operational leverage historically. The Q3 report showed improvement, though, with FCF margin increasing by 580bps year/year. Non-GAAP operating margin increased over 900bps. I will be looking for continued improvement in operating leverage in subsequent quarters.

I have built a mid-sized position in MDB over the last few months (11% currently), and would like to see evidence of the trends outlined above driving financial metrics before increasing further.

Thanks!

poffringa (@StackInvesting)

[SaulR80683]

Hi Peter, glad to have you posting on the board.

Do you have any reason why they are adding fewer customers as time goes on, fewer Atlas, fewer over $100K, fewer total, fewer in every category? (see the nice tabulation in one of the earlier posts on this thread).

That issue seems to call out to be addressed.

Saul

[poffringa]

Hi Saul - That is a fair call-out and needs to be watched in the upcoming quarterly report. We saw a similar flatlining of sequential total customer additions for Datadog over the past year, until the most recent quarter.

The near term opportunity for MongoDB is to grow the number of large customers, those generating more than $100k in ARR. This metric ticked up sequentially from Q2 to Q3. I would like to see this increase further in Q4 and beyond. Large customers only make up 4% of total customers currently, versus 10% for Datadog (which I think is a reasonable comparison). To generate the revenue growth that MongoDB is experiencing, it is likely coming from a subset of large customers (call them extra large). If the expansion of the product offering is encouraging these extra large customers to apply MongoDB to more application workloads, then the same trend should extend to other large customers. However, I agree that there is a risk that this expansion is limited or doesn’t translate to more large customers.

[ronjonb]

First of all, thanks to Peter for sharing his deep insights!

I think this integration that was just announced is very good news for both MongoDB and Datadog…

“Datadog for Government now integrates with MongoDB Atlas for Government to provide US federal and SLED agencies a secure way to monitor their database clusters alongside the rest of their infrastructure.”

"…MongoDB Atlas is a fully managed cloud database service for modern applications. Earlier this year, the MongoDB team released MongoDB Atlas for Government, a dedicated environment for US federal agencies and state, local, and education (SLED) entities that need to meet stringent security and compliance requirements. Atlas for Government, which has achieved FedRAMP Ready and FedRAMP In-Process designations, can be deployed in AWS GovCloud, allowing organizations already operating in this environment to quickly get up and running with this robust database platform. It supports Atlas’s core features, as well as a few additions that are unique to GovCloud.

We’re pleased to announce that Datadog for Government now integrates with Atlas for Government, giving you a safe and secure way to monitor the health and performance of your database clusters alongside the rest of your infrastructure telemetry. Our Atlas for Government integration comes with the same capabilities as our standard Atlas integration, which means that you’ll have a consistent monitoring experience regardless of the version you’re running…"

Cheers!

ronjonb ( https://twitter.com/ronjonbSaaS)

[ronjonb]

I had missed to include this point in my post which I think will be worth watching out for…

AWS Wavelength: AWS Wavelength embeds AWS compute and storage services within 5G networks, providing mobile edge computing infrastructure for developing, deploying, and scaling ultra-low-latency applications.

Some of the interesting use cases are.

Build media and entertainment applications: Deliver high-resolution live video streaming, high-fidelity audio, and augmented/virtual reality (AR/VR) applications.

Accelerate ML inference at the edge: Run artificial intelligence (AI) and machine learning (ML) driven video and image analytics at the edge to accelerate 5G applications in medical diagnostics, retail, and smart factory settings.

And this integration with Verizon…

What is Verizon 5G Edge?: Verizon 5G Edge is a mobile edge computing platform available for businesses. It was designed to enable developers to build applications for mobile end-users and wireless edge devices with low latency.

Verizon 5G Edge brings together Verizon’s ultrafast, low latency 5G Ultra Wideband* network and AWS; industry-leading cloud services to enable the creation of next-generation applications.

5G Edge leverages AWS Wavelength, a new type of AWS infrastructure. Applications are deployed to Wavelength Zones—AWS infrastructure deployments that embed AWS compute and storage services at the edge of the Verizon 5G network—and seamlessly access the breadth of AWS services in the region.

And MongoDB is nicely positioned to enable building a lot of those apps leveraging the above technologies.

This is what they said earlier…

“Through Verizon 5G Edge with AWS Wavelength, we saw the opportunity to explore how to take existing compute-intensive workflows and overlay a data persistence layer with MongoDB, utilizing the MongoDB Atlas management platform, to enable ultra-immersive experiences with personalized experience—reliant on existing database structures in the parent region with the seamlessness to extend to the network edge.”

I’m hoping MongoDB provides some insights into this during the Earnings Call.

Cheers!

ronjonb

[ronjonb]

I think I like their results…waiting for the call

“MongoDB delivered exceptional fourth quarter results, highlighted by delivering 85% Atlas revenue growth and surpassing $1 billion in annualized revenue. Our success is being driven by the fact that our modern application data platform dramatically reduces friction in the development process to make it incredibly easy for developers to build compelling applications that create a competitive advantage,” said Dev Ittycheria, President and Chief Executive Officer of MongoDB.

“We enter fiscal 2023 having established MongoDB as the leading application data platform used to build new and modernize existing applications. Our strong growth in six and seven figure customers is evidence that customers increasingly view MongoDB as a strategic platform. We are confident in our ability to capitalize on our $70B+ market opportunity and deliver strong growth for the foreseeable future.”

Fourth Quarter Fiscal 2022 Total Revenue of $266.5 million, up 56% Year-over-Year
Full Year Fiscal 2022 Total Revenue of $873.8 million, up 48% Year-over-Year
<Continued Strong Customer Growth with Over 33,000 Customers as of January 31, 2022
**MongoDB Atlas Revenue up 85% Year-over-Year;**58% of Total Q4 Revenue

As some of you know MongoDB is a top conviction name for me and I have a 8% position

Cheers!
ronjonb ( https://twitter.com/ronjonbSaaS)

[mekong22]

I think I like their results…waiting for the call

yes, really good

they guided for 42% this quarter and came in at +56% YOY revenue growth

and the new guidance for next quarter is +47%, so probably will come in at least in the mid 50%'s again.

Seeing it dip further below $280/share today, I sold my entire UPST postiion (6%) and added to my top holdings, with a decent amount going into my, already large, MDB stake. It recovered during the afternoon, and now looks like it’s up about 10% (surprised it’s not more) after hours to just over $310/share now.

YOY growth for the past few quarters (note that the quarter just announced 1/31/22 was the fiscal fourth quarter of 2022)

Q3 21 +38%
Q4 21 +38%
Q1 22 +39%
Q2 22 +44%
Q3 22 +50%
Q4 22 +56%

and sequentially:

Q3 21 +9%
Q4 21 +13%
Q1 22 +6%
Q2 22 +9%
Q3 22 +14%
Q4 22 +17%

and sequential dollar increases:

Q3 21 +12m
Q4 21 +20m
Q1 22 +10m
Q2 22 +17m
Q3 22 +28m
Q4 22 +39m

…beautiful!..looking forward to the call.

-mekong

[anthonyms]

Yeh I loved the MongoDB results as well… Atlas continues to drag all numbers upwards now that it has crossed the 50% share in the mix.

Not only is MongoDB in good company with AWS, Snowflake and Datadog but they received significant call out in the DigitalOcean earnings call, who should be a perfect partner for MongoDB in the SMB portion whilst not attempting to offer their own in-house generic competitor like AWS.

https://seekingalpha.com/article/4489910-digitalocean-holdin…

We continue to see rapid adoption of our managed Kubernetes managed databases, app platform and marketplace services. In Q4, they represented 17% of revenue, up from 15% in Q4 2020. Adding to that new product acceleration is our managed MongoDB offering. Launched in late June of 2021, uplift has been very strong and will start to materially impact our growth rate as we move through this year.

Customer adoption has been similar to our other managed database offerings, and we have more than 3,000 customers actively using our managed MongoDB as of Q4. Our managed database services exited 2021 with north of a $26 million ARR in Q4, and it’s growing several times the growth rate of our overall revenue growth rate. We expect managed MongoDB to be a strong pillar in our managed EV strategy and a material contributor this year.

Mark Murphy

Okay. Understood. And Yancey, as a quick follow-up, you had commented that the MongoDB offering will start to materially look your growth rate this year. Can you just give us a quick version of why is that a particular database product scaling quite so rapidly. And I’m not sure what your threshold for materiality is, but – are you saying that, that could give you a tailwind of point or two maybe of growth in the next year or two?

Yancey Spruill

Definitely going to be a tailwind on the growth rate. And I meant material is real many millions of dollars into this year. So that’s what I meant. But it’s going to be a material driver. The database capability is growing several times what our overall growth rate is. It’s a foundational. When somebody goes from having their first customer, tenth customer 50 customers, you can manage that on a napkin Excel spreadsheet. But at some point, to start having more sophisticated tools and a database is a foundational next level capability for an early-stage business that’s ramping. And so that’s why you’re seeing such incredible adoption of that. And so Mongo just supplements that.

We’ll look to add other services. We won’t have dozens of database capabilities because our customer base doesn’t need that expansive of the product set. But Mongo is one of the more popular certainly for digital businesses, and we’re seeing that uplift in traction and validation of why we’ve decided to launch that and partner with Mongo last year.

Raimo Lenschow

Thank you. Can I actually stay on that subject, Yancey? If I think about Mongo is like it’s obviously a very popular database offering, et cetera. But like it’s only one with the database, but is there a lot of other things that we could think about. Can you just talk a little bit about how you see this evolving between adding more products to increase the ARPU versus kind shying away from becoming a complex AWF? That’s my first question.

And the second question is…

Yancey Spruill

Thanks, Raimo. I’ll have to re-ask the second question. But on the first question, we will add – there’s a couple of other databases that our typical profile of a customer might use that we don’t have, but that’s not right. And when you look at the enterprise, it’s so complex in terms of the industry, scope and scale, geography business models, The bigger platforms will have more alternatives because their customers are more complex.

Our customers tend to the then diagram overlap of our businesses, customers tend to be pretty tight. So, we can add one or two other databases over the next year or two, but we don’t need much more than that. And so that’s what I was mentioning.

The second aspect to your question is fundamental. Simplicity is core. Simplicity may be the most valuable attribute of our platform in that it’s simple, easy to use, the experience across the products, the integration of the products, the ease at which customers can onboard and grow and scale and test and grow and loan is foundational as a value proposition. And so when our product team – across our business, when we think about the customer experience, simplicity is in the middle of the room, the elephant in the room all the time.

So that’s – and that’s why I say we’ll add more database engines over time, but it’s a small handful, not a lot. And what will be critical is maintaining simplicity and the experience for the customer, having documentation tutorials, the support experience that’s integral and also reinforces simplicity and of course, will be open source tools that reinforce the entire experience for our customers.

So we will not – that’s the benefit, I think, of being able to focus on this SMB developer ecosystem. They demand simplicity. So, even if we sort of wanted to get out and do something beyond that, that’s not interesting for them. And so we’re going to stay very focused on them and through our roots around simplicity. So, no need to worry that adding to the product set.

We’ve been able to do that over the last few years and obviously see significant revenue uplift and traction because we’re making it easy for customers to adopt new capabilities on the platform.

If you can repeat, I wasn’t clear what your second question?..

These are just a few excerpts from the DigitalOcean conference call as they relate to MongoDB.

Ant

[ronjonb]

Somewhere up in the thread I expressed my excitement about how AWS Wavelength + Verizon 5G Edge + MongoDB Atlas are positioned to help developers build and deploy many interactive applications at the network edge in the coming years.

And when Google Cloud starts writing about Data modernization with Google Cloud using MongoDB Atlas, it worth taking a note.

Anyways, I wanted to let you know that I increased my MongoDB 8% position to a 10% position after hours.

MongoDB has one of the best runways ahead that I can think of for any cloud native SaaS company out there. And it can very well become an equal sized position with Snowflake for me. I also know that there are some specific technical areas where MongoDB can pose a serious threat to Snowflake in the future and Snowflake is cognizant of that.

It’s also great to see so much discussion happening on the two names listed in the title of this thread ( Snowflake And MongoDB). As I had mentioned, I’m waiting for the Databricks IPO and when that arrives my Data Basket will most likely be an equally weighted bucket of Snowflake, MongoDB and Databricks. just like my current Security Basket of Zscaler, SentinelOne and CrowdStrike.

And in the midst of these three top data companies there are many small non-public/ startups solving important and unique problems and these niche players are likely to be acquired by these top three

Happy Investing!

Cheers!
ronjonb ( https://twitter.com/ronjonbSaaS)

Ref: https://goo.gle/35ZT7u4

[poffringa]

Hi All - Since I posted about MongoDB before the earnings report, I will share some thoughts post earnings. Overall, I was happy with the results.

Pros:

• Continued revenue acceleration by over 500 basis points to 56%. Guide for Q1 implies growth should land in the mid-50% range as well. Full year guide initiated at 38% y/y. A year ago, leadership started FY2022 at 31% and delivered 48%. This implies we should see another year of 50%+ growth.
• Operating leverage and profitability improvements. This has been a slow climb, lagging some of our other names, but now showing regular improvement. FCF margin inflected to positive 6.3% (up from -12.1% a year ago). Operating margin is nearly break-even (-0.5%) versus -9.3% a year ago. Gross margins ticked up 2% y/y to 74%.
• Atlas revenue growth accelerated slightly to 85% and now makes up 58% of total revenue.
• Total customers increased another 2,000 to 33,000. I like the consistency of absolute additions, but the sequential rate is decreasing. Nonetheless, this is a large base of customers to grow. Consider that DDOG has about half as many customers and I see the use case reach being similar (app monitoring versus app database).
• Large customer metrics are finally revealing where growth is coming from. Direct Sales customers (larger customers with a sales person assigned) jumped significantly q/q by 500, versus 300 the last few quarters. Direct Sales customers now make up 86% of total revenue. Absolute growth of customers over $100k spend increased the most ever (by 106 seq), elevating sequential growth to 8.8% from 6.7% last q. Leadership also revealed they have 164 $1M+ customers, up 70% y/y from 98 a year ago. This is likely what is driving the revenue outperformance.
• Highlighted partnerships with the hyperscalers (sound familiar - SNOW). Called out AWS specifically, which was viewed as a competitor a couple years back. Mentioned 80%+ growth in deals sourced with the cloud vendors in Q4. I think this inflection from competition to cooperation with the hyperscalers will start providing a tailwind, versus a headwind. This applies to other companies we track, like SNOW and DDOG.

Opportunities for improvement:

• The customer highlights weren’t earth-shattering. It’s likely that brand names either can’t be mentioned or are old news. I do like that new digital native companies are starting out with the majority of workloads on MongoDB (like Coinbase) and that these are mission critical (versus nice-to-have application services).
• I would like to see more concrete evidence of workload expansion. Seeing metrics for the number of customers running specific use cases like time series, key-value, mobile cache, analytics or search would help support the workload consolidation thesis and their Application Data Platform positioning.

In terms of allocation, I added slightly after-hours yesterday when the gain was under 10%. I plan to maintain a mid-sized position for now.

Thanks!

Peter (@StackInvesting)

[Smorgasbord1]

I also know that there are some specific technical areas where MongoDB can pose a serious threat to Snowflake in the future…

I don’t see that so much:

1. MongoDB is a NoSQL (non-structured or semi-structured) database only. Snowflake is primarily a structured database that also handles semi-structured data.

2. MongoDB does not provide an SQL interface, Snowflake provides SQL access to both structured and semi-structured data.

3. MongoDB is primarily a Transactional (OLTP) database while Snowflake is primarily an Analytical (OLAP) database. Now, both can handle the other type of load, but MongoDB’s analytical performance suffers greatly while Snowflake’s cost suffers greatly when doing the other.

4. I should probably do a deep-dive into the differences between, for instance:
   • Cloud native
   • SaaS (Software as a Service)
   • Software as a Managed Service
   • Software provided as a set of Serverless APIs

But, for now just know that MongoDB’s Atlas today is cloud native and SaaS, but it’s arguable whether it’s truly a Managed Service. This is why a third party, Digital Ocean, has a MongoDB as a Managed Service offering! And don’t forget, MongoDB itself has a Serverless version of its database in Preview/Beta today, so that’s going to change (Digital Ocean investors or potential investors need to bone up on this ASAP).

Snowflake is only offered via Serverless APIs. Digital Ocean doesn’t provide any Snowflake services because, well, Snowflake is already a fully managed service that automates just about everything for you.

So, I don’t see MongoDB as any kind of threat to Snowflake. I do, however, see Snowflake as a partial threat to MongoDB, as MongoDB has been trying to push itself as an Analytical solution, for which it’s not ideal. Matter of fact, there are documented workflows that use the Transactional capabilities of MongoDB to act as a “front-end” to a Snowflake instance. MongoDB is great for capturing the data from thousands of IoT devices, for instance, and then batch copying that data over to Snowflake where analytics are performed.

And note that MongoDB is even limited in the Transactional realm, as it’s not a structured database and so isn’t really suitable for many kinds of applications (financial for one) that use structured data and are typically implemented using an SQL interface. This isn’t to say that MongoDB doesn’t have its uses, but when looking at the TAM (Total Available Market), I have to believe that Snowflake’s is much much larger. Very very few companies will migrate from a Teradata or Oracle database to a NoSQL database like MongoDB, for instance.

That said, there are many use case for semi-structured data and the proliferation of things like IoT devices means that such workloads are expanding. So there is definitely a need for something like a MongoDB, and I did take advantage of the sympathy drop in MDB earlier this week to (re)start a small position.

[anthonyms]

But, for now just know that MongoDB’s Atlas today is cloud native and SaaS, but it’s arguable whether it’s truly a Managed Service. This is why a third party, Digital Ocean, has a MongoDB as a Managed Service offering! And don’t forget, MongoDB itself has a Serverless version of its database in Preview/Beta today, so that’s going to change (Digital Ocean investors or potential investors need to bone up on this ASAP).

I agree Smorgasbord1 - although I actually think SMBs come to DigitalOcean because not because MongoDB doesn’t offer a true “managed service” but because they can get access to all of their mission critical applications and managed services curated in one place - and without having to pay the extreme/egregious expenses of AWS. I don’t think they want to have to get get managed services to each and every vendor out there and manage multiple vendors directly.

Ant