Mar 14, 2018
Executives
Brian Denyeau - ICR, IR Dev Ittycheria - CEO Michael Gordon - CFO
Analysts
Sanjit Singh - Morgan Stanley Heather Bellini - Goldman Sachs Richard Davis - Canaccord Jack Andrews - Needham
Presentation
Operator
Good day, and welcome to the MongoDB Fourth Quarter Fiscal 2018 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.
Brian Denyeau
Thank you, Don. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter and full year fiscal 2018 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 CFO. During this call, we may make statements related to our business that are forward-looking on Federal Securities Law and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Including statements related to our financial results, trends and guidance for the first quarter and full year of fiscal 2019, industry and market trends, our go-to-market and growth strategies, our introduction of future product enhancements and the potential advantage of those enhancements, our market opportunity and ability to expand our leadership position and drive revenue growth, our ability to maintain and up-sell existing customers, our ability to acquire new customers, our ability to expand our relationship with partners and anticipate a benefit of our platform for our customers and partners. 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 reflected upon 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 the material risk and other important factors that could affect our actual results, please refer to those contained in our quarterly report on Form 10-Q filed with the SEC on December 15, 2017 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.
A development, release and timing of any feature or functionality described for our product remains at our sole discretion. This information is merely intended to outline our general product direction and should not be relied on and making a purchasing decision in order to commitment promise or legal obligation to lever any material code or functionality.
Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release and 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'll turn the call over to Dev.
Dev Ittycheria
Thank you, Brian and thanks to all of you for joining us today to review our fourth quarter results. MongoDB delivered strong performance across the Board which reflects our growing market momentum and position as the leading modern general purpose database platform.
To quickly summarize our fourth quarter results, we've generated revenue of $45 million, a 50% year-over-year increase and above the high end of our guidance. We ended the quarter with over 5,700 customers, up 78% compared to a year ago.
We saw strong growth across both, Enterprise Advanced, EA for short, and Atlas customers; and now Atlas is over 10% of revenue representing more than 500% increase from a year ago. When looking at the larger industry trends, it has become clear that the success of every business rests on their ability to use technology and in particular software and data to create a competitive advantage.
Businesses want to quickly develop new products and services to drive new revenue streams, improve the customer experience, engage them in a more meaningful way and to constantly find ways to reduce the risk and the cost of doing business. As a result, nearly every business is fast becoming a software who have risk of being eaten by one.
But these digital initiatives often fail. KPMG issued a study last year that found that 88% of CIOs don't think they have fully benefited from the digital strategy and 82% don't believe their companies are effective at using technology to advance their business.
One of the main reasons they fail is their inability to leverage their data. A study by Localus [ph] found that companies don't think they are good at using their data with more than 40% of CIOs mentioning that their data is too solid across the organization, it's highly complex to synthesize that there are so many rules around data compliance that they have to work around and much of the data is trapped in complex legacy infrastructure.
Consequently, we are starting to see the beginning of a real platform shift where customers realize the only way to solve this problem is to modernize the legacy infrastructure by moving to a next-generation data platform. This is driving a massive opportunity for MongoDB for three main reasons.
MongoDB offers a superior way to work with data because of the power and flexibility of the document model. Our platform allows our customers to put data where they need it due to our intelligent, highly distributed architecture for reasons around scalability, availability, compliance and geographic coverage.
We give customers the freedom to run anywhere; from the mainframe to the cloud, and including a database as a service offering, all of the same unified experience for the developers. This allows customers to future proof their work by knowing that they don't have to re-write their applications if and when they move from on-premise to the cloud.
So millions of developers have already discovered the power of MongoDB, and as a result made MongoDB the most popular next-generation database. In fact, just this morning the stack overflow annual developer server results which pulled more than 100,000 developers from 183 countries were released.
This survey provides real insight into what technologies developers find most attractive and impactful. The survey showed for that the second straight year MongoDB was the most wanted database by developers.
This provides yet another datapoint that shows that MongoDB has clearly established itself as the database of the future and the hearts and minds of developers everywhere. And we're just getting started.
In mid-February we announced that MongoDB 4.0 which is scheduled to be launched this summer and is now in beta will extend ACID transaction support available in a single document to multiple documents. With as such support, MongoDB can now provide all of the same data guarantees of a legacy database coupled with the performance, scale and flexibility benefits of a document based architecture which reinforces our position as the leading modern general purpose database platform.
We've already seen great success replacing legacy databases which represents approximately 30% of our new business. Now with the introduction of ACID transaction support we believe there is no reason that customer would need to use a legacy database instead of MongoDB.
For those of you not familiar with asset, it's a set of properties that were designed to ensure data integrity and consistency with legacy databases. This was a must have because they store data in tables.
Specifically, the data is typically spread across multiple tables, often hundreds of tables. When adding new data or making updates, the database needed to guarantee -- meet a set of guarantees to ensure that the data was properly and consistently entered or updated across all of these tables.
These guarantees are called asset, they are cornerstone of the legacy world and something many users consider a must have in order to be considered a viable database. With a document database, data does not need to be spread out in many different places, rather it is modeled in a single document.
MongoDB has always provided asset support within a single document; it's our belief that people who are not comfortable using MongoDB for transaction heavy used cases, felt this way primarily because they didn't fully comprehend that most data relationships can be modeled with the document or that transitions within the document were already asset compliance. Having multi-document asset compliance has been a highly requested product feature for some time and with the introduction of 4.0 we now give companies the peace of mind to build anything on MongoDB.
As a result, we believe there is no used case today where our traditional database is a better fit than MongoDB. Delivering asset compliance across a distributed multi-document database is a challenging technological problem and one that our engineering team has been working on for three years.
FORO [ph] was a tremendous achievement and reflects the world class engineering talent we have in this Company. Turning to our fourth quarter results in more detail.
We are pleased with the combination of new logo wins and strong upsell activity. And the continuing trend of customers migrating workloads of legacy databases to MongoDB.
We have a power land and expand model and our fourth quarter results show that it's working. During the fourth quarter we were excited to add new enterprise customers including ASML, Netherlands, Live Person, Micro-strategy, Pizza Hit and the State of Maryland.
We also expand our relationship with customers such as AstraZeneca, CISCO, Mount PSI [ph], Samsung TIAA and T-mobile. We had an exciting new customer win during the quarter with one other largest car rental companies in the United States.
A key strategic priority for the CIO was to modernize their infrastructure and move mission critical applications off legacy databases. The Company's reservation pricing engine, one of the most mission critical applications was built on a legacy database on the mainframe.
As the business grew and customer engagements increased, they experienced a greater performance and rising costs. They needed a database platform that could improve performance, lower cost and support the Company's future move to the cloud.
They decided to migrate to MongoDB because of our powerful document model, faster query performance, ability to run anywhere including on the mainframe, as well as on the cloud and the endorsement of their preferred systems integrator. In the first few months after deploying EA, this customer has been able to significantly reduce mainframe consumption for this application which translates into millions of dollars in annual cost savings.
Also this past quarter we expand our relationship with Freddie Mac who launched an initiative to modernize a number of applications that were previously built on legacy databases. One application, their property appraisal tool, held massive amounts of property and loan information but was increasingly expensive and time consuming to update within a relational database.
Leveraging MongoDB, Freddie Mac was able to collect information for a variety of different sources and in a variety of format to build a single view of all the information needed to actively appraise the property. MongoDB was chosen because of its flexible data model and the high ability of the database.
In the months since using MongoDB, Freddie Mac has seen an increase in developer productivity. Atlas delivered outstanding results in the fourth quarter, it represents 11% of our overall revenue and grew more than 500% year-over-year.
We're seeing healthy demand from new customers, existing EA customers purchasing incremental Atlas workloads, as well as existing Atlas customers who continue to significantly expand their usage of Atlas. We once again saw a number of six figure Atlas transactions and are seeing a growing percentage of Atlas customers have committed to a certain usage levels.
And 7 quarters we've gone from launching Atlas to creating a business that's entering fiscal 2019 with a revenue rate of over $20 million. This is great validation of the opportunities for Atlas and we believe we've only scratched the service.
The flexibility of Atlas to serve both, the sale solution, that can attract new customers as well as the solutions that customer can quickly scale up over; is a key differentiation market. A good example of this is Snagajob, the largest profile for early work in the U.S.
with more than 80 million registered workers and 300,000 employer location. Snagajob upgraded from community server to Atlas.
Snagajob had successfully grown it's business on community server did to the power [ph] platform but at the business continue to grow, the overhead of active provision, configure, secure, backup and managed infrastructure themselves detracted from their ability to focus on their own competitive advantage. After evaluating Atlas, they recognized it would be significantly more cost effective to use Atlas than to manage their ever-growing infrastructure themselves.
Snagajob made a multi-year six-figure annual commitment to Atlas as the long-term platform on which you can build innovative applications and scale-up business overtime. We believe that there are hundreds of thousands of other community server users like Snagajob that are great candidates to move to Atlas overtime.
In the fourth quarter we also made significant progress in building out our partner ecosystem. In December we announced the availability of MongoDB Atlas on AWS marketplace making it easier for more than 160,000 existing AWS customers to buy and consume MongoDB Atlas.
MongoDB has also joined at AWS SaaS sales alignment program enabling the AWS sales force to drive MongoDB Atlas revenue through co-selling and to get compensated for it. MongoDB and Microsoft also launched a new co-sell program for MongoDB Atlas and Microsoft Azure which enables the Microsoft sales force to do the same.
Our cloud partnerships are truly win-win as they provide us deeper access to our partner's customer bases as well as driving significant infrastructure revenue for them. Finally, Tata Consulting Services developed a mainframe modernization practice built around MongoDB and elevated MongoDB as a Top 20 global strategic partner.
As I look to 2019, I couldn't be more excited about the opportunities ahead; we have a massive market opportunity which IDC estimates will be over $63 billion by 2020, a highly innovative product, a high performance go-to-market model and the team and their credibility to execute. We believe we're still in the early stages of establishing MongoDB as the seminal software franchise with the opportunity to sustain high levels of growth for a long period of time.
When you look at the size of our market opportunity, we believe the best thing to drive long-term shareholder value is to remain focused on investing for growth while continuing to drive improved margins. Specifically we're focused on the following priorities; continuing to invest in our strategic data platform, transactions which I discussed earlier is just part of the many innovations coming with the release 4.0, we're significantly investing in Atlas, adding new capability to drive adoption expansion, as well as enterprise grade upsell opportunities to drive additional revenue and margin expansion.
We're also making investments to make it easier than ever for developers to build applications on MongoDB with MongoDB Stitch. MongoDB Stitch provides a service that frees developers from undifferentiated and cumbersome backend coding like handling user log-ins and highly granular access to data.
We're integrating with other third-party services like Two-Layer [ph] Stripe or running and scaling application servers. We're also making investments in mobile and expanding the app to ensure what developers can do with our platform, including some very interesting data visions of Asian capabilities that we plan to launch later this year.
The second is driving strong revenue growth through expansion of our sales capacity and related marking investments. We're at the very early stages of pen [ph], one of the largest market in software which is right for disruption.
In fiscal 2019, we plan to continue to expand our direct sales team in order to expand it in new markets, as well as deepen up penetration where we already have sales coverage. We're attracting world class sales count and we'd be looking to that sales reps who have experience closing larger and more strategic deals.
Third, driving deeper relations with partners to elevate MongoDB's customer mind-share. We're seeing increase in traction of leaders in digital transformation, particularly the larger systems integrators in the world and we believe that their role as trusted advisors for digital transformation can help elevate our positioning among C-level executives or prospective customers.
This year we'll invest to more tightly align with partners as part of our strategy to pursue larger, more strategic customer relationships. And fourth, making our culture and reputation a competitive advantage.
Nothing is more important than having a culture that allows us to attract the best people. We're investing significantly in sales enablement technical training and leadership development programs to help acquisition and other initiatives to make MongoDB a place where employees can have the option to grow and succeed in their careers.
Before I turn it over to Michael, I want to provide an update on our senior leadership team. Carlos Delatorre, our Chief Revenue Officer, will be leaving MongoDB at the end of our first fiscal quarter to become the CEO of our Private Technology Company.
Over the last few years, Carlos has helped MongoDB deliver rapid growth at scale, and most importantly, for the long-term he has built a worldclass sales organization that positions MongoDB incredibly well for the future. I'm personally excited for Carlos as he and I worked together closely over the last 13 years plus and consider him not just a colleague but also a friend.
We wish him well as he begins the next chapter in his career and thank him for his contributions over the last 3 plus years. Carlos will stay on until the end of the quarter to ensure a smooth transition.
We are beginning a search process to identify our next sales leader and will carefully evaluate both, internal and external candidates. In the meantime, sales would directly report to me in addition to my plus experience building high performance sales organizations, we also have a deep sales leadership bench most of whom I worked with before.
We are also in the fortunate position of having a board member, John McMahon who is probably the only individual who has been the head of sales for five different public software companies. John and I worked together in leadership roles at two of those companies, so he is someone I know very well.
John has been closely engaged with our sales team since joining the board a year and a half ago, and he will increase his level of involvement and support for the business during this transition. So in summary, the fourth quarter was a great finish to a record year for MongoDB, we're extending our product leadership, expanding our customer base, and increasing customer usage, all of which is helping to drive best-in-class revenue growth.
And now to review the financials, let me turn the call over to Michael.
Michael Gordon
Thanks, Dave. As mentioned, we're very pleased with our fourth quarter results which kept a strong year for MongoDB.
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 2019. Total revenue in the quarter was $45 million, up 50% year-over-year.
Subscription revenue was $41.9 million, up 54% year-over-year; and professional services revenue was $3.2 million, up 16% year-over-year. The strong performance of the business was broad-based during the quarter, with healthy new logo and upsell activity among enterprise customers as well as continued rapid adoption of Atlas.
Atlas represented 11% of revenue during the quarter, up from 3% in the fourth quarter of last year and representing an annualized revenue run rate of over $20 million. We continue to see global demand for our offerings.
During the fourth quarter we grew our customer base by approximately 800 customers bringing our total customer account to over 5,700 customers which is up from over 3,200 customers in the year ago period and over 4,900 customers at the end of last quarter. Of our total customer account, over 1,450 customers are direct customers, more than 20% from the year ago period.
The growth in our total customer account is being driven large part by Atlas which had over 3,400 customers at the end of the quarter compared to over 2,600 at the end of the third quarter. The growth in total customers includes growth at our Enterprise Advanced customers, as well as new Atlas customers.
It is important to keep in mind that the growth in our Atlas customer account reflects both new customers to MongoDB, as well as existing Enterprise Advanced customers adding incremental Atlas workloads. We also continue to see healthy expansion from existing customers.
Our net ARR expansion rate remained above 120% in the fourth quarter. We ended the quarter with 354 customers with at least $100,000 in ARR and annualized MRR, which is up from 320 in the third quarter and up from 246 in the year ago period.
In addition, as evidence of our growing strategic value to customers, we now have over 20 customers with more than $1 million in annual recurring revenue, up from just 2 customers at that level two years ago. Driving expanded adoption and spend among existing customers is a key component of our growth strategy and has been a consistent area of success.
Even among our largest customers today, we believe that their spend with MongoDB represent a small fraction of our their total database spend which represents a large and attractive growth opportunity for us overtime. Moving down to P&L; I will be discussing all of our results on a non-GAAP basis, unless otherwise noted.
Gross profit in the fourth quarter was $33 million representing a gross margin of 73% and consistent with a year ago period. We are pleased with the gross margin performance in the quarter, particularly in light of the growth in Atlas.
Recall, Atlas includes the underlying infrastructure and we've had success in reducing the infrastructure costs related to Atlas resulting in improved Atlas gross margins. We still anticipate Atlas will be a modest headwind to gross margins overall but we are tracking well relative to our original expectations.
As a reminder, today Atlas represents incremental dollars of gross profit given that it's monetizing are free offering. Our operating loss was $21.1 million or a negative 47% operating margin for the fourth quarter, which was a meaningful improvement from a negative 56% margin in a year ago period.
We're pleased with our ability to generate the strong operating leverage while continuing to make investments to grow and expand our business. Net loss in the fourth quarter was $20.2 million or $0.40 a share based on $50.3 million weighted average shares outstanding.
Looking at our P&L results on a full year basis; we generated a total revenue of $154.5 million, which was up 52% year-over-year. Gross profit was $112.9 million or 73% gross margin which is up 100 basis points year-over-year.
Finally, operating loss was $76 million or a negative 49% operating margin, which was an approximately 1,500 basis points improvement year-over-year. Turning to the balance sheet and cash flow; we ended the quarter with $279.5 million in cash, cash equivalents, short-term investments in restricted cash.
Short-term deferred revenue was $114.5 million, up 45% year-over-year while total deferred revenue of $137.4 million was up 47% year-over-year. We believe longer term trends in deferred revenue are directionally correlated to the underlying momentum of our business.
That said, 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. Also as a reminder, Atlas is a consumption model that is typically builds monthly in arrears versus the annual and advance billing terms we typically see in our EA customers.
Lastly, quarter-to-quarter comparisons to deferred revenue could also have some level of variability due to the timing of events that may occur. Operating cash flow in the fourth quarter was negative $7.7 million after taking into consideration approximately $400,000 in CapEx, free cash flow is negative $8.1 million for the quarter.
I'd now like to turn to our outlook for the first quarter and full fiscal year 2019. Beginning with the first quarter, we expect revenue to be in the range of $45.5 million to $46.5 million, including $3 million to $3.5 million of professional services revenue.
Non-GAAP loss from operations is expected to be in the range of $22 million to $21.5 million, and non-GAAP net loss per share to be in the range of $0.44 to $0.43 per share based on 50.4 million weighted average shares outstanding. For the full fiscal year 2019, we expect revenue to be in the range of $211 million to $215 million.
Non-GAAP loss from operations is expected to be in the range of $84 million to $82 million, and non-GAAP net loss per share to be in the range of $1.66 to $1.62 per share based on 51.5 million weighted average shares outstanding. In closing, we finished a strong year with a strong quarter; we're excited about the opportunities that lie ahead in fiscal 2019.
And with that we'd like to open up for questions. Operator?
Operator
[Operator Instructions] And we'll take our first question from Sanjit Singh with Morgan Stanley.
Sanjit Singh
Dev Ittycheria
Sanjit Singh
Michael Gordon
Sanjit Singh
Dev Ittycheria
Michael Gordon
Sanjit Singh
Dev Ittycheria
Operator
We'll take our next question from Heather Bellini with Goldman Sachs.
Heather Bellini
Dev Ittycheria
Michael Gordon
Operator
We'll take our next question from Richard Davis with Canaccord.
Richard Davis
Dev Ittycheria
Operator
We'll go now to Pat [ph] with JMP Securities.
Unidentified Analyst
Dev Ittycheria
Unidentified Analyst
Dev Ittycheria
Operator
[Operator Instructions] For our next question, we'll go to Jack Andrews with Needham.
Jack Andrews
Dev Ittycheria
Jack Andrews
Dev Ittycheria
Operator
That does conclude today's question-and-answer session. At this time, I'll turn the conference back over to Mr.
Dev Ittycheria for any closing remarks.
Dev Ittycheria
Again, I want to thank you all for listening to our earnings call. We are really, really excited about what happened in Q4 but even more excited about the future.
We feel like the combination of the product, the team, the market and the larger secular trends are all in our favor and we're very excited about a strong 2019. So thank you very much for your time and we'll speak to you soon.
Operator
That conclude today's conference. Thank you for your participation.
You may now disconnect.