Good day, ladies and gentlemen, and welcome to the MongoDB Fourth Quarter Fiscal 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian Denyeau, ICR, Investor Relations. Please go ahead, sir.

Thank you, Keith. Good afternoon and thank you for joining us today to review MongoDB's fourth quarter and fiscal 2019 financial results, which we announced in our press release issued after the close of market today. Joining me on the call today are Dev Ittycheria, President and CEO of MongoDB; and Michael Gordon, MongoDB's Chief Operating Officer and Chief Financial Officer. During this call, we may make statements related to our business that are forward-looking under federal securities laws. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our financial guidance for the first quarter and full year fiscal 2020, our fiscal 2020 priorities, our market opportunity, database market dynamics, the anticipated benefits of our products for our customers, our ability to expand our leadership position, our growth strategy, the impact of the adoption of ASC 606 on the future financial results and our ability to generate margin expansion. The words anticipate, continue, estimate, expect, intend, will and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views only as of today and should not be constitute as representing our views as of any subsequent date. We do not have plans to update these statements except as required by law. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our annual report on Form 10-K filed with the SEC on March 30, 2018, our quarterly reports on Form 10-Q filed on September 7th and December 6, 2018 and our other periodic filings with the SEC. These documents are available on the Investor Relations section of our website at www.mongodb.com. A replay of this call will also be available there for a limited time. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. And with that, I'd like to turn the call over to Dave.

Thanks, Brian, and thank you to all of you for joining us today to review our fourth quarter and full year results. The fourth quarter was a tremendous finish to what was a milestone year for MongoDB. Our results reflect broad-based performance in all geographies, across industries and amongst small, midsize, and enterprise customers through our sales-led and self served channels. I will be discussing our results for the fourth quarter and full-year on an ASC 605 basis only. Later, Michael will review our results under ASC 606. To quickly summarize our fourth quarter results. We generated revenue of $83.1 million, an 85% year-over-year increase, which was above the high end of our guidance. We grew subscription revenue 87% year-over-year. Atlas revenue grew more than 400% year-over-year and now represents 34% of revenue. And we ended the quarter with over 13,400 customers, up approximately 130% compared to a year ago. For the full year, we generated revenue of $253.8 million, a 64% year-over-year increase, which was above the high end of our guidance. We grew subscription revenue 67% year-over-year. And Atlas revenue grew more than 400% year-over-year and represented 24% of annual revenue. While we constantly seek to get better at what we do, we are quite pleased with our performance last quarter and last year and are well-positioned for fiscal 2020 and beyond. We have established MongoDB as the next generation database platform of choice. And our goal is to maximize the massive market opportunity in front of us. We believe our wide appeal, the success of our customers and our financial performance continue to clearly highlight that MongoDB's document database offers the best way to work with data. Documents correspond directly to objects and mainstream object oriented programming languages, so developers can store and organize data according to…

Thanks, Dave. As mentioned, we are very-pleased with our fourth quarter performance, which reflects strong, continued growth at significant scale. I'll begin with a detailed review of our fourth quarter and full year results and then finish with our outlook for the first quarter and full year fiscal 2020. Before I jump into the numbers, I would like to take a minute to explain the impact of the adoption of ASC 606 that will have on our financial results. We’ve implemented ASC 606 on a full retrospective basis, which means we have recast our prior results for fiscal 2019 and prior periods under the new revenue recognition standard. There are two primary ways ASC 606 impacts our financial results. First, revenue recognition. Enterprise Advanced transactions will now have a portion of the contract value recognized upfront while the remainder will be recognize ratably over the contract term. As a reminder, most contracts are annual. However, for an illustrative three-year contract under 606, we will now recognize the term license component for all three years upfront. This will result in greater variability and reduced comparability in our quarterly revenue results. It’s important to note that the adoption of 606 will not impact how Atlas revenue is recognized. Second, sales commission capitalization. 606 broadens the scope of capitalized commissions. Now, under 606, all incremental costs, including commissions and payroll taxes, as a result of closing a deal, are capitalized. Previously, only direct, deal-specific commissions were capitalized under 605. Additionally, the estimated amortization period is generally longer under 606 as compared to 605. This has the impact of modestly lowering our reported sales and marketing expense. For fiscal 2019, the adoption of ASC 606 resulted in a $13.2 million increase in revenue or approximately 5%, a $6.6 million reduction in sales and marketing…

Thank you. [Operator Instructions] We'll take our first question Raimo Lenschow with Barclays.

Hey, guys. This is [indiscernible] for Raimo Lenschow. Congrats on a incredible quarter here. My first question, can you talk about the product evolution for Atlas in terms of enterprise features, what you've achieved so far, and where do you see Atlas evolving to in fiscal 2020?

Yes. So, thank you for the question. So, obviously, we're really pleased with the growth of Atlas. I think, what it really speaks to is the popularity of MongoDB and the strong product market of Atlas, because customers really want to focus on differentiated work, being able to focus on innovate and building applications and not have to deal with a burden of operational and database management. In terms of the enterprise features, we've added a number of security features. And I think we’ve signaled since the IPO that we were in the process of moving a bunch of features in Enterprise Advanced to Atlas, and we've done that including lot of security features, things like auditing, access control, authorization, et cetera, including things like monitoring and auto scaling, and so forth. So, all those features now are embedded in Atlas. And there's a variety of different service offerings, depending on the SLAs and the features that customers want.

Okay. And as my follow-up, a little bit more of a boring question, but on 606, what percentage of the total contract do you - are you recognizing upfront for the enterprise contracts? And does your guidance assume a similar percentage of multiyear contracts for FY20 versus FY19?

Sure. So, there's certainly been some variability. We have not assumed any major changes in terms of the mix. So, certainly to the extent that that mix varies, that will impact the results. It varies in terms of the question of how much of the upfront license, obviously it effects on the duration of the contract as well as on the product mix but in general it’s roughly in the area of [technical difficult] is the current estimate, although obviously as things continue to move to change, we will update that accordingly. And as you can see from a macro perspective, if you look at the full year, it has effect about 5% on overall revenue.

We will take our next question from Sanjit Singh with Morgan Stanley.

This is actually Keith Weiss sitting in for Sanjit. Two questions, one, kind of looking backwards on Q4. That was a pretty amazing quarter, really strong acceleration. Anything in particular kind of turn on for you guys, any kind of catalyst to that acceleration in the performance that you could point out to us what happened in Q4? And then, the second part of the question, looking forward in FY20 with Pech now sort of taking that Chief Revenue Officer and heading into new fiscal year, any significant changes you guys are making in sales structure or go-to-market strategy with sort of the new sales leadership into the new fiscal year?

Thanks, Keith. Glad to have the big dog on the call. I just wanted to respond to the two questions. So, I would say, our performance is really a function of the flywheel effect. I think we’ve seen a number of advancements on the product. And so that’s given customers a lot of confidence, especially around asset transactions and the fact that we are now - it's clearly understood that we are truly a general-purpose database and wide variety of use cases that customers employ us for is clear evidence of that. I think, the fact that we have notable marquee references across a wide variety of industries gives customers even more confidence. And I would say, the efficacy of our go-to-market channel has just gone better and better over time. Clearly, there is a little bit of seasonality in our business. And so, the fourth quarter tends to be a big quarter in general. But, we were quite pleased with the performance that we saw. And I still believe that there is lots of things that we can get better at over time. And in terms of Cedric’s appointment, I was quite thoughtful about looking at a successor for our last CRO. And I did talk to a number of people outside the organization. But as I looked at how quickly our business was changing and the complexity of our business, it made much more sense to promote someone from within. Cedric is also someone I've known for a long time. He did a fantastic job in really driving the European business. And since his appointment, he has really won over the rest of the sales force. I would say that there is going to be no major changes to sales force. We have a really strong bench in North America and Asia and the rest of the world. I think, what Cedric is really going to focus on is just taking our sales process and our ability to scale the sales organization to the next level to drive sustained growth. You’re not going to see any wild changes in terms of how we go to market.

Yes, more just about scaling the current organization?

Exactly.

We will take our next question from Heather Bellini with Goldman Sachs.

I was just wondering if you could share with us - there has been a lot of debate in the market about mLab and customers potentially leaving. And I just was wondering if you could help set the record straight and just kind of walk us through whether or not you do expect some customer migration. I mean, there has been different versions of what’s going on in the market. I was just wondering since we’re on this call, maybe you could just kind of level the playing field for everybody and just kind of tell us what you’re expecting from that acquisition, and if you did have one or two customers leave, what would be the driving force in that and kind of any other feedback you've heard from their installed base? Thank you so much.

Thanks Heather. The reason we acquired mLab was really, they were the pioneers in the MongoDB as a service offering and they did that way ahead of us. And the other thing that they did a really good job of was build their entire business on a self-serve basis. They didn't have one salesperson. So, those two things were really big reasons why we acquired that business and the talent that we've acquired from Will Shulman on down, has been very impressive and really pleased to have the team as part of MongoDB. When we did our diligence, there was clearly some understanding that there were some customers who may be moving in different directions, currently some of those customers were working on really old releases of MongoDB that had not upgraded to more recent versions of MongoDB. And so, we factored in some of that attrition into our guidance and estimates. And so, we don't see any material impact to any of the potential changes that you may have heard. And we are now starting to build relationships with many of these customers. Obviously some of them are very small customers, some of them are larger customers, and it's going to take some time for us to get them to understand the benefits of upgrading to the latest releases of MongoDB, and we shall see about how those relationships evolve. But, we have taken a very conservative posture and there's no impact on our guidance.

The only thing I would add, just so that people understand is, we just shared the customer count for mLab, which is approximately 4,200 customers. And when you look at the revenue that that's driving, the math for that works out to be around, $5,000 a year. So, these are typically not large customers. Yes, there are a couple of outlier customers that are larger and have brand names, but the vast, vast majority of the customer base is of a much smaller level. And clearly, we've been pleased, there was a modest beat in Q4. We upped the fiscal 20 guidance just on this call from the $18 million to the $20 million. So, I think it's going sort of well and better than expected. And so, that's all I think very healthy.

Okay, great. And then, just one quick follow-up would be, is there any way you could share with us your lands kind of the pace of your lands and how those initial lands might be increasing, especially with some of the new enhancements to the product over the last year?

Yes. I would say, our lands are definitely increasing. I think, it's for a number of factors. One, I would say is we clearly made some pretty significant product enhancements over the last few years. It has given customers more confidence to use us for mission critical workloads. I would say, two - I think I’ve mentioned this on prior calls. We've become - clearly view it as a very strategic partner to many customers. So, the level at which we engage with, in these organizations, tend to be at a quite a higher level. And so, that allows us to go after bigger deals. And then, I would just say in, general, the efficacy of our go-to-market process where we try and you do a lot of discovery early on in engagement with the customer, but then use that information to go find [ph] organization to present the potential benefits we could offer and the clear understanding of the pain that they're going through, whether it's trying to consider building a new application or the struggling with the performance or the brittleness of the existing legacy application. All those things are impacting our ability to get bigger land. So, that is definitely happening. But, this is still a land and expand business because this is not a win or take all market, we still have a very small percentage of wallet share of some of the largest customers that we have, and we still have to go and earn more business from them. But, we feel very, very confident of our ability to do so, given our track record to-date.

We will take our next question from Brad Reback with Stifel.

Dev, with respect to the DocumentDB announcement, have you seen that have any impact on your ability to build top of funnel pipeline.

We see no impact, Brad. In fact, I think it's frankly raised MongoDB’s awareness. I have to remind people that 98% of the market today is built on relational databases that technology that’s over 40 years old. So, when you have people now trying to emulate MongoDB, what are really signals is one that we’ve become incredibly popular and the reason we’ve become incredibly popular is that the document approach is now being viewed as the best way to work with data. And so, now, our customers starting say, well, instead of using relational databases, I want to use document databases and they want to do a bake off. We feel very confident about our ability to go head-to-head with any other alternative out there. And so, we think that actually this has been great for awareness and great for customer education and we see no impact on a negative basis whatsoever.

And just one quick follow-up, and I know it was sort of asked in aggregate. But the Atlas business accelerated 100 basis points sequentially, the 400% growth from 300% last quarter. Is that a function of some year-end true ups with customer contract or just a function of that level of acceleration in the install base? Thanks.

So, Atlas benefited from a number of dynamics and we’re very, very pleased with the quarter. Obviously, we had the addition of mLab for the first time in the quarter. But even if you skip that out, it was a very strong and accelerating quarter from an overall Atlas performance. It’s strong addition of new customers, it’s consumption of existing customers. The other thing that we did try and call out in the prepared remarks, though was that we did benefit from a number of customers in Q4 who were consuming Atlas at rates in excess of their contracted amounts. And so, we always keep an eye to that in terms of like what is a relative run rate and how does that compare relative to the contracted rate. And so, we don’t have enough history with Atlas, yet to know as to how much of that is sort of pulling forward or actually establishing a new run rate level. And so, we just - we want to keep an eye on that and want to make sure that sort of expectations don’t go out of control as you all extrapolate things because I do think that’s a dynamic, that’s a play but it was really very, very strong across the board.

[Operator Instructions] We will take our next question from Brent Bracelin with KeyBanc Capital Markets.

Thank you. And one for Dev and a follow-up for Michael. Dave, I wanted to drill down on Atlas. It’s kind of hard not to discuss just given the momentum of the business here. Few businesses we see at $100 million run rate growing this fast. And even if I back out mLabs, it looks like growth accelerated again. You talk a little bit about consumption, but I was wondering if you could just drill down a little bit more relative to why this business is accelerating now and at this pace? Is there something that happened in the quarter, are you seeing higher catch rates of the add-on security services. Any sort of additional color on Atlas, and I know you talked a little about the customer spend over $1 million are going into 39. Are there any Atlas customers now spending a million plus on that category? So any color on what drove the momentum in Atlas would be helpful.

Yes. Thanks for the question. I would say the fundamentals are the following; one, obviously MongoDB has become incredibly popular and two the product market fit of Atlas has been incredibly strong. I mean, we have seen high growth rate since we launched the product about two and a half years ago. So it just exceeded our expectations. I would say what has also now kicked in is two things, one our sales organization, it took some time for sales organization to know how to sell a cloud service. And what we are seeing by the results is that the sales organizations acumen around doing that has become better and better. And the other thing is the introduction of the enterprise features, the enterprise features have allowed two things to happen; one allowed us to get bigger deals and also has given comfort to To a certain type of customer who is very, very concerned about, say things like security and data security in the cloud. In fact, we had a very large notable financial services institution who basically contracted a quite a large deal with Atlas and they tend to be pretty conservative, they are moving very slowly into the cloud. And this was a consumer facing application to have a very, very sensitive consumer data. And they spent an enormous amount of doing a lot of assessments and of our technical architecture. And they got convinced about the strength of the product and the best-in-class security features and that resulted in a large transaction. So that is just one anecdote. But there is lots of anecdotes like that where large, sophisticated customers who now want to move workloads to cloud are moving towards Atlas. And the other big benefits for customers is that there is no lock into any particular cloud provider. So while they may choose one cloud provider today, they recognize that those relationships may evolve overtime and they like the flexibility of being able to move from one cloud to another cloud. And frankly, moving that application back in-house where I will have to rewrite one line of code. So that gives customers enormous amount of comfort and optionality in terms of what they can do in the future. So all those factors are driving I think the acceleration of MongoDB Atlas.

Very helpful color there, encouraging to hear some larger opportunities pop into Atlas as well too. I guess for Michael is a follow-up gross margins kind of look like it did downtick, kind of this is the first quarter with mLabs, is that the big contributor there and how should we think about kind of the gross margin here in the low 70s, is this kind of a sustainable rate or do we still have a little bit of a mix shift we need to think about relative to that gross margin profile going into fiscal 2020.

Yep. So thanks Brent. Yes, there will definitely continue to still be mix shift. The higher percentage that is driven by Atlas is acting as a short-term drag on the overall gross margin. mLab though, to your point is meaningfully lower gross margins than Atlas and so that is a particular kind of incremental drag that you know by the end of the year should dissipate. But I would not say that this is not the bottom, we will continue to see as at Atlas, assuming it continues to grow faster, we will see some short-term gross margin compression, but we continue to see increases in organic Atlas, Atlas ex mlab, gross margins, and we have been very pleased with the performance there and we will continue to work towards driving those higher over the next several quarters.

Thanks. That is all I had.

Thank you.

We will take our next question from Richard Davis with Canaccord.

Thanks very much. So I think you guys recently partnered with Datadog, I think it was on Atlas but could you talk briefly about that relationship and just more broadly. Could you provide some like color as to what are obvious places where future technology partnerships make sense, because obviously you don’t need to build every single items out there so. Thanks very much.

Yes. So thanks, Richard, just in full disclosure, I’m actually on the boards of the Datadog and I have been there for quite some time, but frankly this announcement we just made was really function of organic interest by our customers obviously Datadog has done incredibly well, as a private company and their monitoring tool has become very popular. And so be able to get visibility into MongoDB database statistics, because the databases is probably the most important layer of the application that is critically important for customers and so providing a integration made a lot of sense for customers. And so in terms of other partnerships or potential integration is integration to other complementary management tools that may help customers, for example, we integrate with Kubernetes that has become the container of choice for lots of customers to orchestrate and virtualize their application environments. We have built that integrations to customers have a Kubernetes operator to basically invoke MongoDB and all the functionality with the MongoDB. So there is a bunch of other types of integration that we have done. And so we feel basically work backwards from what a customer is looking for, how can we help customers better manage their infrastructure or how can we do better on their behalf and make it easy for them to building applications and that drives our integration priorities.

Thank you very much.

We will take our next question from [indiscernible] with Oppenheimer.

Thanks Ittycheria. Congrats, great quarter guys. A couple of questions for me first on the services revenue and other one on [indiscernible] such a great quarter, but growing only a miserable 37%. Help me understand the disconnect between the add and subscription is it just because Atlas is a little bit more self-service than [indiscernible] business, how do I think about the correlation of that going forward to subscription revenue.

I think the most simple explanation is the subscription revenue is recurring revenue whereas the services revenue is typically one-time. And so you really sort of starting all over again and so when you think about the amount of services that you are delivering in the aggregate it’s actually a pretty healthy growth rate given the fact that your usually starting over. That is probably the biggest factor. Qualitatively we do also see a little bit lower services attach rate on Atlas, but the principal driver really is around how much of this is recurring revenue versus one-time revenue.

Very good and as a follow-up Dev, just want to make sure I understand your IT comment about SSPL, the growth from the OSI approval process. Can you explain - during the implications for this outside of just the headline that you I guess you cannot call yourself right now open source officially what the implication of this?

I would say the implication is the following. We own all our IP, so this is important, like any other software who own IP, we can control how we license our software, we also big believers in open source and so it’s clear that the concerns we raised and we try to codify this concerns in our new license called SSPL there has been a lot of receptivity to that, but it's clear that the industry needs more time to coalesce around what the right answer is long-term. So rather than trying to force people to use SSPL as the answer we said let's rather be a good partner to the rest of the community, we want to work with the community and come up with an answer that makes sense for everyone and so long story short, our software is still licensed under SSPL not only current and future versions, but also any patch releases to prior versions will be licensed under SSPL, so that is an important point. And we believe we are still open source, whatever name you may want to apply to it, source available free to use, you know we still conform to the forest offer freedoms that the open source principles points out the freedom to run for any purpose, the freedom to study, exchange and have access to the source code, the freedom to redistribute copies and the freedom to distribute copies of modified versions and all those freedoms still apply. So from that point of view, we are still an open source company.

Very good. Alright, congrats. Good luck.

Thank you.

Thank you.

We will take our next question from Rishi Jaluria from DA Davidson.

Hi, guys. This is Hannah on for Rishi. Thanks for taking my questions. First question. I was just wondering on functionality, if you have gotten any feedback from customers, or if on your end, there is any sort of functionalities still like to build out on the core enterprise advanced product?

Oh, yes. So I mean, obviously, we have a very strong and robust roadmap. We are investing a lot in R&D. And so for example, you know, we are introducing asset transactions for - asset for shorted clusters so that adds another level of asset capability. We have field level encryption coming out. We have something called [retravel rights] (Ph) it adds more resiliency to your application, so you don't have to worry about if right tales, you don't have to worry about building logic to deal with that that is going to be built at the database. So the whole bunch of features that are coming out in our two release later this summer, and we are very excited about that released. Obviously, we continue to innovate on the Atlas front. We also have products like stitch that enable developers to more quickly build applications. So you are seeing us continue to expand the aperture of what we do to help customers use MongoDB for more and more use cases. And I won't comment on this now, but I think you will hear some really interesting announcements of something that we are going to be expanding into that we are really, really excited by. And I will save that for another time.

Okay, that is really helpful. Thanks. And then second question, I was just wondering if you could expand a little on your deepened partnership with IBM. And if the go to market strategy changed at all, and how the partnership differs from what it was in previous quarters?

Sure. So one of the reasons we struck an agreement in IBM is, while we are growing really quickly, and we are building out of Salesforce relative to the market, you know, opportunity in front of us, we still have a fairly small sales organization. So one of the things that we are trying to solve for is reach, because we see this once in a generation shift happening in the database market and the things that we worry about are deals that are happening that we are not even privy to. And so the thing that IBM does for us is really expand our reach especially in markets that we don't have presence in or accountant that we don’t have presence in. And the other way they help us is that because of the deep history and knowledge of key IBM accounts. They can also accelerate deals and make deals bigger and more quickly than say we could do on our own. So both those factors has really allowed us to have a really a win-win relationship. As I noted in my remarks, we have closed a number of deals, momentum is very strong. So we further deepened our relationship and we feel very excited about what that relation can deliver for us in fiscal 2020 and beyond.

Thank you.

We will take Tyler Radke with Citi. Please go ahead.

Thanks, good evening. I was wondering if you could talk about the impact of the licensing changes, have you seen that obviously the companies that were using your software and reselling it like scale grid, compose, object rocket. Have you seen a positive impact from those customers actually moving over to Mongo or any other companies you are aware of where customers have transitioned because of the licensing change.

So I would say that we have some fruitful conversations and expanded some relationship with certain cloud providers who did not have a commercial relationship with us and we are engaged with some of the others and hope to do so in the next few quarters. I would say that in general, the receptivity of SSPL has been very positive and I would also say that if you are a customer of MongoDB SSPL doesn’t really matter, because you end up having commercial relationship with us. So this is really for the people who are using our free to use download version of our software and so as you will see from results, we feel really good about the business today and how its positioned for the future.

Great and then a follow-up. Just if you look at next year ahead, how big do you think Atlas could ultimately be as a percent of revenue, and sorry if I missed it, but are you making any changes just from a sales incentive plan around Atlas, I know you are comping on the same on dollars previously, but given that Atlas is typically 2X the ASP of an enterprise advance. Just curious if you are making any changes there.

Again I want to remind people that one of our philosophy is to help customers run their workflows anywhere. So you literally could MongoDB on your laptop if you are developing application, you could run it on premise and use enterprise advanced and you can run in the cloud using Atlas. And so we are very committed to enabling customers to run their work load’s wherever they want and obviously you can choose your cloud provider depending on where you want to run your workload in the cloud. And so that will not change and we have not given incremental incentives for our salespeople to sell Atlas over enterprise advanced. I think what we are seeing is that obviously the megatrends is people are moving more and more workloads to the cloud and clearly our customers are following that trend. And they like the fact that MongoDB Atlas is the most widely available global cloud database in the world. Its available in over 60 regions as a virtue of being able to run on AWS, Azure and GCP and so the fact that customers not only have a choice of cloud providers, but can really choose to run their workloads almost anywhere in the world. That makes along with the power and the benefits of MongoDB’s document model and the query language. And so given all those benefit there is a reason why Atlas has become so popular.

And ladies and gentleman this will conclude today’s question-and-answer session. At this time I will turn the conference back to Dev Ittycheria for any additional or closing remarks.

I want to thank everyone for joining us on our fourth quarter call. We really appreciate all the support and we thank you and we look forward to speaking to you again. Take care. Bye-bye.

Ladies and gentlemen this does conclude today's conference. We appreciate your participation.