MongoDB, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by and welcome to MongoDB’s [Technical Difficulty] At this time, all participants are in a listen-only mode. After the speaker’s presentation [Technical Difficulty] question-and-answer session. [Operator Instructions] [Technical Difficulty] I will now turn the conference over to your host, Mr. Brian Denyeau. [Technical Difficulty] Go ahead.

Brian Denyeau: Thanks, Valerie. Good afternoon, and thank you for joining us today to review MongoDB’s fourth quarter fiscal 2024 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 COO and CFO. During this call, we will make forward-looking statements, including statements related to our market and future growth opportunities, our expectations for the macroeconomic environment in fiscal 2025 and the impact of AI, the benefits of our product platform, our competitive landscape, customer behaviors, our financial guidance, and our planned investments. These statements are subject to a variety of risks and uncertainties, including the results of operations and financial conditions, that cause actual results to differ materially from our expectations.

For discussion of material risks and uncertainties that could affect our actual results, please refer to the risks described in our quarterly report on Form 10-Q for the quarter ended October 31, 2023, filed with the SEC on December 7, 2023. Any forwarding-statements made in this call reflect our views only as of today, and we undertake no obligation to update them except if required by law. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release on the investor relations portion of our website for reconciliation of these measures to the most directly comparable GAAP financial measures. With that, I’d like to turn the call over to Dev.

Dev Ittycheria: Thanks, Brian, and thank you to everyone for joining us today. I’m pleased to report that we had another strong quarter that capped off an impressive year as we continue to execute well to capture a large market opportunity. I will start by reviewing our fourth quarter and full year results before giving you a broader company update. Starting with the fourth quarter, we generated revenue of $458 million, a 27% year-over-year increase and above the high end of our guidance. Atlas revenue grew 34% year-over-year, representing 68% of revenue. We generated non-GAAP operating income of $69.2 million for a 15% non-GAAP operating margin, and we ended the quarter with over 47,800 customers. Overall, we are pleased with our performance in the fourth quarter.

We had a healthy quarter of new business led by continued strength in new workload acquisition within our existing Atlas customers. In addition, our Enterprise Advanced business again exceeded our expectations, demonstrating strong demand for our platform and the appeal of our run anywhere strategy. Moving on to Atlas consumption trends, the quarter played out in line with our expectations and we saw a stronger consumption than in Q4 last year. Michael will discuss consumption trends in more detail. Finally, retention rates remained strong in Q4, reinforcing the quality of our product and the mission criticality of our platform. Stepping back and looking at fiscal ’24 as a whole, I’m proud of what we accomplished. We achieved revenue growth of 31% and a non-GAAP operating margin of 16%, well above our initial expectations.

Atlas grew 37% year-over-year, and we added over 7,000 customers, ranging from AI startups to Fortune 500 companies. We had a record year of fast-paced innovative product releases such as Vector Search, Queryable Encryption, and the preview of Atlas Stream Processing, reinforcing why so many customers and developers choose MongoDB’s developer data platform. Finally, we continue to innovate on our go-to-market motion to drive workload acquisition. As we look into fiscal ’25, let me share with you what I see in the market. First, I’m excited about our opportunity to win new business. In today’s digital world, customers express their business strategy through software. The software [indiscernible] strategy that one of the most important investments a company can make is in the productivity of its software developers.

Consequently, customers are gravitating towards MongoDB as their next generation developer data platform standard. Second, I see stable consumption growth going into next year. Atlas consumption trends have been steady for several quarters now, and we experienced less consumption variability in fiscal ’24 compared to fiscal ’23. Ultimately, the main driver of Atlas consumption is the growth in the underlying application usage and we see stable usage growth across our portfolio of workloads. Third, while I strongly believe that AI will be a significant driver of long-term growth for MongoDB, we are in the early days of AI, akin to the dial-up phase of the Internet era. To put things in context, it’s important to understand that there are three layers to the AI stack.

The first layer is the underlying compute and LLMs. The second layer is the fine-tuning of models and building of AI applications. And the third layer is deploying and running applications that end users interact with. MongoDB’s strategy is to operate at the second and third layers to enable customers to build AI applications by using their own proprietary data together with any LLM, close or open source, on any computing infrastructure. Today the vast majority of AI spend is happening in the first layer, that is investments in compute to train and run LLMs. Neither are areas in which we compete. Our enterprise customers today are still largely in the experimentation and prototyping stages of building their initial AI applications, first focus on driving efficiencies by automating existing workloads.

We expect that it will take time for enterprises to deploy production workloads at scale. However, as organizations look to realize the full benefit of these AI investments, they will turn to companies like MongoDB, offering differentiated capabilities in the upper layers of the AI stack. Similar to what happened in the internet era, when value accrued over time to companies offering services and applications leveraging the built-out Internet infrastructure, platforms like MongoDB will benefit as customers build AI applications to drive meaningful operating efficiencies, create compelling customer experiences, and pursue new growth opportunities. We already see our platform resonating with innovative AI startups building exciting applications for use cases such as real-time patient diagnostics for personalized medicine, cyber threat data analysis for risk mitigation, predictive maintenance for maritime fleets, and auto-generated animations for personalized marketing campaigns.

Finally, our competitive position is getting stronger. Our win rates remain very high across all competitors. We rarely compete with legacy database providers as enterprises understand that they need to move away from inefficient and brittle legacy technology. We also rarely run into niche database players since customers are overwhelmed by the proliferation of point solutions that are hard to manage and add limited value. Our main competition remains the cloud players. They offer a wide array of database options, relational and non-relational, and benefit from their size and reach. We compete well against these players due to the flexibility and scalability of our document architecture. The fact that our open platform can run anywhere and avoids lock-in and MongoDB’s popularity among developers all around the world.

Finally, when you look at our newer products, we see increased success competing against the established players in those markets. We find that the same principle applies as in the core database market. Customers don’t want to manage a myriad of point solutions and prefer consolidating their spend with strategic vendors, especially in the current cost conscious environment. In summary, we expect the environment in fiscal ’25 to be largely similar to the environment we experienced in fiscal ’24. With that backdrop, let me tell you what our priorities are going to next year. First, we’ll continue pressing our product advantage in the core database, since we believe customers will place an even greater premium on performance and scalability in the AI enabled world.

In addition, we’ll continue maturing our newer products, including additional features of Vector Search, GA of Atlas Stream Processing, and enhancements to other offerings. Second, we will remain singularly focused on new workload acquisition as the key long-term driver of our business. We will continue fine-tuning incentives to ensure that our entire go-to-market organization is focused on identifying and sourcing new workload opportunities. In addition, we will leverage our expertise and learnings from our self-serve business to use product-led growth techniques to increase the adoption of Atlas by other development teams within our existing large enterprise accounts. Third, we are focused on growing sales capacity. As we told you in the past, we were slow to grow capacity in fiscal ’24, especially in the first half due to macro uncertainty.

Given that the market is more stable now and that we remain under-penetrated compared to our opportunity, we’ll increase the pace of go-to-market investments in fiscal ’25. Fourth, we will continue investing to become a standard in more of our customer base. We intend to double the size of our strategic account program and dramatically expand our account-based marketing efforts in our largest accounts. Finally, we remain focused on locking the relational migration opportunity. To remind everyone, there are three elements to migrating an application, transforming the schema, moving the data, and rewriting the application code. Our current relational migrator offering is designed to automate large parts of the first two elements, but rewriting application code is the most manually intensive element.

GenAI holds tremendous promise to meaningfully reduce the cost and time of rewriting application code. We will continue building AI capabilities into Relational Migrator, but our view is that the end solution will be a mix of products and services. This year, we are investing in a number of pilots leveraging AI for relational migrations paired with services to substantially simplify and scale the process. Now I’d like to spend a few minutes reviewing the adoption trends of MongoDB across our customer base. Customers across industries around the world are running mission-critical projects on MongoDB Atlas, leveraging the full power of a developer data platform, including ZF, Forbes, and Swiss Federal Railways. ZF, a global technology company supplying systems for passenger cars, commercial vehicles, and industrial technology, needed a central database solution with broad functionality to support more than 300,000 commercial vehicles connected to ZF infrastructure.

ZF originally began using MongoDB on-premise in 2014 and migrated to MongoDB Atlas to modernize the architecture behind its new fleet orchestration solution. The team now uses time series and online archive to reduce the overall data storage size, as well as MongoDB Atlas Search to manage indexes and Atlas Charts to display billing information. MongoDB’s developer data platform enables ZF to release new features faster as innovative technologies like drones and autonomous vehicles continue to come to market. In any — PicPay and Anywhere Real Estate are examples of customers turning to MongoDB to free up the developers’ time for innovation while achieving significant cost savings. Anywhere Real Estate, a global leader in residential real estate services whose brand portfolio includes Better Homes and Gardens, Century 21, Coldwell Banker, Corcoran, ERA, Sotheby’s International Realty, is leveraging MongoDB Atlas and Atlas Search to greatly enhance its search capabilities.

Their previous solution was too costly and operationally burdensome to maintain. Now with Atlas Search, they can ingest data from hundreds of MLS sources, aggregate the data and provide customers with a search solution that efficiently delivers accurate and up-to-date information, saving time and lowering costs. Anywhere is also exploring the use of Atlas Vector Search to provide semantic search and GenAI features to millions of consumers. Samsung Electronics, ArcelorMittal and Citizens Bank are turning to MongoDB to marinize applications. Samsung Electronics digital appliances division transitioned from their previous MySQL database to MongoDB Atlas to manage their clients data more effectively. By leveraging MongoDB’s document model, Samsung’s smart home service can collect real-time data from the team’s AI-powered home appliances and use it for a variety of data-driven initiatives such as training AI services.

Their migration to MongoDB Atlas improved response times by more than 50% and disk read latency was reduced from 3 seconds to 18 millisecond, significantly improving availability and developer productivity. Let me wrap up by saying that I remain highly confident about our ability to execute on our long-term growth opportunity. We are pursuing one of the largest and fastest-growing markets in all of software, with significant expansion opportunities in both new and existing customer accounts. While it’s early days, we expect that AI will not only support the overall growth of the market, but also compel customers to revisit both their legacy workloads and build more ambitious applications. This will allow us to win more new and existing workloads and to ultimately continue to establish MongoDB as a standard in enterprise accounts.

Before I turn it over to Michael, I would like to personally invite all of you to attend the investor session at MongoDB.localNYC to be held at the Javits Center on May 2nd. Please email if you’re interested in attending. With that, here’s Michael.

Michael Gordon: Thanks, Dev. As mentioned, we delivered a strong performance in the fourth quarter both financially and operationally. I’ll begin with a detailed review of our fourth quarter results and then finish with our outlook for the first quarter and full fiscal year 2025. First I’ll start with our fourth quarter results. Total revenue in the quarter was $458 million, up 27% year-over-year, and above the high end of our guidance. As Dev mentioned, we had another quarter of healthy new business acquisition, demonstrating our product market fit and the mission criticality of our platform. Shifting to our product mix, let’s start with Atlas. Atlas grew 34% in the quarter compared to the previous year and now represents 68% of total revenue compared to 65% in the fourth quarter of fiscal 2023 and 66% last quarter.

We recognize Atlas revenue primarily based on customer consumption of our platform, and that consumption is closely related to end user activity of the application. As a reminder, in Q4 fiscal ’23, we had a higher than normal amount of revenue from unused commitments, making this a tough year-over-year comparison. Excluding the impact of unused commitments, Atlas year-over-year growth in Q4 was in line with the growth that we observed in Q3. Let me provide some additional context on Atlas consumption in the quarter. As we shared in our guidance last quarter, we were expecting consumption to be impacted by the seasonal slowdown in Q4 around the holidays. Week-over-week consumption growth in Q4 was stronger than in Q4 of last year and in line with our expectations.

We’ve seen less consumption variability this year, and so as in Q3 we forecasted less of a seasonal impact than in prior years and that’s exactly what we saw. Turning to non-Atlas revenue, EA exceeded our expectations in the quarter and we continue to have success selling incremental workloads into our existing EA customer base. Ongoing EA strength speaks to the appeal and success of our run anywhere strategy. The EA revenue app performance was in part a result of more multi-year deals than we had expected. As a reminder, the term license component for multi-year deals is recognized as upfront revenue at the start of the contract and therefore includes term license revenue related to future years. Turning to customer growth, during the fourth quarter, we grew our customer base by approximately 1,400 customers sequentially bringing our total customer count to over 47,800, which is up from over 40,800 in the year-ago period.

Of our total customer count, over 7,000 are direct sales customers, which compares to over 6,400 in the year-ago period. The growth in our total customer count is being driven primarily by Atlas, which had over 46,300 customers at the end of the quarter, compared to over 39,300 in the year-ago period. It’s important to keep in mind that the growth of our Atlas customer count reflects new customers to MongoDB, in addition to existing EA customers, adding incremental Atlas workloads. Moving on to ARR, we had another quarter with our net ARR expansion rate above 120%. We ended the quarter with 2,052 customers with at least $100,000 in ARR and annualized MRR, which is up from 1,651 in the year-ago period. We also finished the year with 259 customers spending a million dollars or more annualized on our platform compared to over 213 a year ago.

Moving down the income statement, I’ll be discussing our results on a non-GAAP basis unless otherwise noted. Gross profit in the fourth quarter was $353.6 million, representing a gross margin of 77%, which is down from 78% in the year-ago period. As we said at the time, our gross margin in the year-ago period reflected a one-time benefit of roughly 2.5 percentage points related to one of our cloud partner contracts. Our income from operations was $69.2 million, or a 15% operating margin for the fourth quarter, compared to a 10% margin in the year-ago period. Our strong bottom-line results demonstrate the significant operating leverage in our model and are a clear indication of the strength in our underlying unit economics. The primary reason for our operating income results versus guidance is our revenue outperformance.

Net income in the fourth quarter was $71.1 million, or $0.86 per share, based on 82.9 million diluted weighted average shares outstanding. This compares to net income of $46.4 million, or $0.57 per share, on 80.8 million diluted weighted average shares outstanding in the year-ago period. Turning to the balance sheet and cash flow, we ended the fourth quarter with $2 billion in cash, cash equivalents, short-term investments, and restricted cash. Operating cash flow in the fourth quarter was $54.6 million and $121.5 million for the full fiscal year 2024. After taking into consideration approximately $4.1 million in capital expenditures and principal repayments of finance lease liabilities, free cash flow was $50.5 million in the quarter. This compares to free cash flow of $23.8 million in the fourth quarter of fiscal 2023.

For the full fiscal year ’24, free cash flow was $109.9 million compared to negative $24.7 million in fiscal ’23. I’d now like to turn to our outlook for the first quarter and full fiscal year 2025. For the first quarter, we expect revenue to be in the range of $436 million to $440 million. We expect non-GAAP income from operations to be in the range of $22 million to $25 million and non-GAAP net income per share to be in the range of $0.34 to $0.39 based on 83.8 million estimated diluted weighted average shares outstanding. For the full fiscal year 2025, we expect revenue to be in the range of $1.9 billion to $1.93 billion, non-GAAP income from operations to be in the range of $186 million to $201 million, and non-GAAP net income per share to be in the range of $2.27 to $2.49, based on 85.1 million estimated diluted weighted average shares outstanding.

Note that the non-GAAP income per share guidance for the first quarter and full fiscal year 2025 includes a non-GAAP tax provision of approximately 20%. I’ll now provide some more context on our guidance, starting with the full year fiscal ’25, where we’re facing difficult compares in two ways. First, we expect to recognize close to zero revenue from unused Atlas commitments in fiscal 25, compared to over $40 million in fiscal ’24. As you may recall, in fiscal ’24, we changed our sales incentive structure to reduce the importance of upfront commitments. And so we saw far fewer upfront commitments. Therefore, as those fiscal ’25 — ’24 deals come up for renewal in fiscal ’25, we expect to see limited revenue related to unused commitments.

Second, in fiscal ’24, we recognized approximately $40 million more in multiyear license revenue than we did in fiscal ’23. As you know, our fiscal year ’24 non-Atlas revenue benefited from a higher-than-usual amount of license revenue related to multi-year contracts, including our extended partnership with Alibaba. Clearly we are pleased with the fiscal ’24 performance, but it was unusual in terms of the magnitude of multi-year deals and we don’t expect similar performance in fiscal ’25. As a result, we expect non-Atlas revenues to be modestly down in fiscal ’25. Next, we expect Atlas consumption growth to be in line with the consumption growth we’ve experienced in fiscal ’24. Finally, I want to provide some context to better understand our operating margin guidance.

The $80-plus-million of fiscal ’24 revenue that won’t repeat in fiscal ’25 was very high margin, making for an exceptionally tough operating margin compare. In addition, as we mentioned in the past, in fiscal ’24 we began increasing our pace of hiring relatively late in the year. So the full cost from those investments will impact our fiscal ’25 operating margin. We’re expecting headcount growth in the mid-teens versus 9% growth in fiscal ’24. And as Dev mentioned, we are prioritizing growth in sales productive capacity. Consequently, we expect to see a year-over-year operating margin decline while still delivering 500 basis points of margin expansion on a two year basis. We believe this is the most appropriate way to understand our continued margin progression.

Moving on to our Q1 guidance, a few things to keep in mind. First, we expect Atlas revenue to be flat to slightly down sequentially. Q1 has two fewer days than Q4 this year, which represents a revenue headwind. Also, the slower Atlas consumption growth during the holidays will have a bigger impact on Q1 revenue than it did in Q4, thereby negatively impacting sequential revenue growth. Finally, the sequential impact from the expected decline in unused Atlas commitments will be most pronounced in Q1, given that we made the changes in Q1 of last year. Second, we expect to see a meaningful sequential decline in EA revenue. As discussed in past years, Q4 is our seasonally highest quarter in terms of our EA renewal base, which is an excellent indicator of our ability to win new EA business.

In Q1, the EA renewal base is sequentially much lower. Finally, we expect operating income to decline sequentially due to lower revenue as well as our increased pace of hiring. To summarize, MongoDB delivered strong fourth quarter results. We’re pleased with our ability to win new business and see stable consumption trends in Atlas. We remain incredibly excited about the opportunity ahead and will continue to invest responsibly to maximize our long-term value. With that, we’d like to open it up to questions. Operator?

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