MongoDB Inc (MDB) 2018 Q3 法說會逐字稿

Good day and welcome to the MongoDB third-quarter fiscal 2018 earnings call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Brian Denyeau. Please go ahead, sir.

Thank you, Brian. Good afternoon, and thank you for joining us today to review MongoDB's third-quarter 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, CEO of MongoDB; and Michael Gordon, MongoDB's CFO.

During this call we may make statements related to our business that are forward-looking (technical difficulty) federal securities laws, 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 fourth fiscal quarter and full fiscal year 2018, industry and market trends, our go-to-market and growth strategies, our market opportunity and ability to expand our leadership position, our ability to maintain and upsell existing customers, our ability to acquire new customers, and the anticipated benefit of our platform.

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 upon 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 risks and other important factors that could affect our actual results, please refer to those contained in the final prospectus related to our initial public offering and our other periodic filings with the SEC. These documents are available in 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 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'd like to turn the call over to Dev.

Great. Thank you, Brian. I'd like to thank everyone joining us today on our first quarterly earnings call as a public company. MongoDB's successful IPO in October was a major milestone for us and for our industry. The database market is one of the world's largest software markets, and MongoDB was actually the first database company to go public in over 20 years. Our disruptive technology, unique business model, and proven track record with customers has enabled us to deliver rapid growth at significant scale.

In the third quarter, we generated revenue of $41.5 million, representing a 58% year-over-year growth rate, and an annualized revenue run rate of over $160 million. We had over 4,900 customers at the end of the third quarter, which is up 88% compared to a year ago. Our success to date clearly demonstrates that MongoDB is the leading modern, general-purpose database.

Before I review some of the operational highlights of our third quarter, I want to take a few minutes to reiterate the investment thesis we presented during the IPO roadshow, since this is our first earnings call as a public company.

MongoDB was founded by developers who were tired of working around the constraints of a relational database. They started with a clean sheet of paper and built a database they always wanted: a solution by developers for developers, to allow them to more easily and efficiently build mission-critical applications. As software becomes more strategic, organizations are choosing technologies that drive developer productivity.

In fact, the increasing importance of developers is giving them disproportionate influence in how technology is evaluated, adopted, and ultimately monetized. And because a database is at the heart of every software application, selecting a database has become a highly strategic decision.

But most applications today are built on database technologies that were introduced over 40 years ago, and a lot has changed in that time. Organizations are moving applications away from legacy computing platforms deployed on-premise to modern, agile architectures that can be deployed either on-premise or in the cloud.

These changes made the database market ripe for disruption, just as we've seen at the application layer, the management layer, and the infrastructure layer of the IT stack in recent years. That's what we're doing at MongoDB. And we've only scratched the surface of the opportunity in front of us.

MongoDB was built to address the needs of modern applications and to maximize developer productivity. Our unique platform combines the best of relational and non-relational databases. We preserve aspects of legacy databases that developers have come to value, like sophisticated access to the data, guarantees for data integrity, and comprehensive management functionality to operate, monitor, and manage the database platform. We combined this with the flexibility, scalability, and always-on reliability of modern approaches.

The result is a platform that enables organizations to build and deploy mission-critical applications, on-premise or in the cloud, for an incredibly broad array of use cases many times faster than they could with legacy products. This approach has completely changed the game for application developers, and we believe this is reflected in our adoption and mind share.

Our freemium community server has been downloaded more than 30 million times since 2009, with more than 10 million just in the last 12 months alone. 451 Research, an industry analyst firm, did a study that found more developers list MongoDB as a skill on LinkedIn than nearly all other next-generation databases combined. And according to Stack Overflow, a leading developer forum, developers want to work with MongoDB more than any other database. In addition, just two weeks ago, AWS CEO, Andy Jassy, noted that MongoDB is kicking butt on AWS.

These stats establish MongoDB as the modern leader in the massive database market. IDC estimates in their most recent report from November 2017 that the database market is $44.9 billion in 2016, growing to $63.3 billion in 2020. We believe we are well positioned to go after both net new applications as well as existing applications that will be modernized, and, in many cases, moved to the cloud. In fact, approximately 30% of our new business already comes from migrations of applications from legacy relational databases. As a result, we believe we are well positioned to address a large part of this massive market.

A key element of our success is our licensing model. This model combines the adoption benefits of open source with the economic benefits of a proprietary software business model. Our AGPL licensing model provides significant benefits versus the traditional Apache license model. One, we own the IP; two, we control the roadmap; three, we define the wall between free and paid features; and four, importantly, AGPL limits the appeal of other companies, including cloud vendors, of monetizing a version of our software without licensing it from us. We believe this provides a strong defensive mode for the Company.

We use our freemium community server product to drive developer mind share and adoption and then monetize through our commercial products. As a result of this, our business is a recurring software subscription license business, evidenced by the fact that 90% of our total revenue is made up of subscriptions. Our primary enterprise offering is called MongoDB Enterprise Advanced, which includes our proprietary database server, advanced security, enterprise management capabilities, analytic integrations, and more.

More recently, we have extended our reach with the introduction of MongoDB Atlas, our database-as-a-service offering. Atlas enables our customers to consume MongoDB as a service without having to manage the database. And they pay for it with a consumption-based pricing model. This is a core component of our run-anywhere strategy, which enables customers to develop and run MongoDB in any computing environment, including a laptop, a data center, private cloud, as well as the public cloud.

Atlas is available on AWS, Microsoft Azure, and Google Cloud Platform, giving customers the flexibility to deploy it on the public cloud platform of their choice and to avoid vendor lock-in. This model allows us to directly monetize the value of our community server offering.

From a go-to-market perspective, we have three distribution channels. First, we have built a world-class sales and marketing organizations that's really tuned to acquire customers quickly. Second, we have a low-friction, self-serve channel for MongoDB Atlas. And third, we leverage partners, from large global system integrators to ISVs and other technology companies, to expand our reach, add value to our products, and identify new market opportunities. We have established a world-class go-to-market team that is driving strong growth in both new customer wins as well as expansion. We have a land and expand and expand model, and this is reflected in our net AR expansion rate, which has consistently been over 120%.

With that background, let's take a deeper look at our third-quarter performance. We saw a broad-based strength in acquiring new customers and expanding relations with existing customers across all geos. During the third quarter, we added new enterprise customers such as China Mobile, Centers for Medicare and Medicaid Services, DR Horton, and 7-Eleven. We also expanded our relationship with enterprise customers such as Axiom, Otto, Pitney Bowes, Samsung, and Square Enix, the company behind the game Tomb Raider.

I'd like to take a few minutes to review a couple key customer wins in the quarter that demonstrate our success. A great example of a company choosing MongoDB to support highly mission-critical business initiatives is the Washington Post Company, which has transformed from a traditional news provider into a global digital media company. As part of this process, The Washington Post needed a comprehensive database platform for its online publishing system. They chose MongoDB Enterprise Advanced after a highly competitive sales process where they closely evaluated a number of other alternatives, due to our proven ability to drive increased developer productivity while also helping meet high SLAs for uptime and disaster recovery.

We also signed a significant multi-year deal with a top five global telecommunications company who has set out to transform how it engages with customers on mobile. Historically, this customer's application development was decentralized, leading to an inconsistent user experience, lengthy development times, and high costs. The goals were to decrease overall operational costs, unify strategy across regions, and improve customer experience to reduce customer churn and attract new subscribers.

The customer chose MongoDB to replace its legacy platform because we offered a significant reduction in both infrastructure and application development costs; significantly faster application development cycles, as this customer will now be able to build a single application that can be reused across regions; and a much improved performance at scale compared to what they were able to achieve with their relational database.

We also had a very strong quarter with Atlas, which now represents 8% of our overall revenue, and included several six-figure wins. We also continue to see significant expansion from existing Atlas customers, most of whom have been on the platform for less than a year. This validates our belief that Atlas can serve both as a low-friction onboarding solution that can attract new customers, as well as a solution that customers can quickly scale up over time as they look to build more applications using an as-a-service components.

We also continue to push the pace of innovation in the market. To that end, we recently introduced significant new product capabilities and enhancements with the release of MongoDB 3.6. These will further improve developer productivity, scale, and time to insight.

I'd like to highlight five key capabilities. First, most applications increasingly have real-time requirements. For example: a credit card application that notifies you when you make a big purchase, or a trading system that initiates a buy or sell order when a stock hits a specific price. To help make it easier for developers to build these kinds of event-driven applications, we launched a feature called Change Streams. Think of this as push notifications for the database.

Second, since day one, MongoDB is architected for high availability. Now a new feature called Retryable Writes takes it to the next level. It ensures that even if a database server goes down for a millisecond, the user won't notice because the database will retry the operation in the background; another big time-saver for developers, as they don't have to build workarounds in their application code.

Third, new capabilities in our management platform, Ops Manager, make it easier than ever for ops teams to inspect and improve database performance in real time. For example, we added performance advisor, which finds slow-running queries and auto generates recommendations to improve performance. This makes it incredibly easy for an ops team to ensure a high-quality experience for the users.

Fourth, allowing customers to run MongoDB anywhere is a key adoption driver for Atlas. And as an extension of the strategy, we launched Cross Region Replication. This new capability provides two key benefits. One, it ensures that an application stays up even if the entire cloud region goes down. And two, it lets customers put data closer to the users for better application performance.

Fifth, we continue to make it easier for customers to extract more value from their data. By making significant performance improvements to our connector for BI in this release, we're helping data scientists and business analysts analyze their data by connecting any SQL-based business intelligence tool directly to MongoDB without having to move their data to a separate warehouse or data lake.

Additionally, we expanded our relations with a number of key partners. We launched a mainframe offloading solution with Infosys to help customers accelerate their digital transformation and application modernization efforts. We announced the MongoDB Connector for BI as a certified named connector in Tableau, helping customers analyze rich, modern data structures directly from MongoDB. And we announced the availability of MongoDB as part of the Accenture Insights Platform, Accenture's analytics-as-a-service-solution, helping customers address analytics at any scale and for a wide range of use cases.

So, in summary, we had a great quarter. And now to review the financials, let me turn the call over to Michael Gordon.

Thanks, Dev. As mentioned, we're very pleased with our third-quarter results. Before reviewing the details of our financial performance and our outlook for the remainder of the year, I'd like to provide an overview of our financial model, given this is our first call as a public company.

MongoDB primarily generates revenue from subscriptions, which typically run at 90% or more of our total revenue. Subscription revenues come from subscription license packages, primarily our Enterprise Advanced offering, as well as our database-as-a-service offering, MongoDB Atlas. We also have professional services revenue which is tied to service offerings designed to increase our customers' success, retention, and expansion.

Enterprise Advanced is priced on a per-server basis and typically has 12-month contracts. We invoice customers annually in advance, and generally recognize license revenue ratably over the term of the contract. More recently, we've seen a growing number of customers making multi-year commitments as MongoDB has become increasingly strategic. But even for these agreements, we typically invoice these customers annually. Pricing and invoicing for Enterprise Advanced is the same whether a customer chooses to deploy it on-premises, in the cloud, or in a hybrid environment.

As Dev mentioned, we have a land and expand model. We drive growth by expanding our subscriptions within existing customers and acquiring new customers who are just starting to use our platform. We launched Atlas about 18 months ago in the middle of our fiscal 2017. Atlas is currently based on feature set included in our community server and provides us with a way to monetize our freemium offering directly. It is an elastic offering, and it is priced on a consumption metered basis, consistent with typical cloud offerings.

Now let me turn to our third-quarter results. Total revenue in the third quarter was $41.5 million, up 58% year-over-year. Subscription revenue was $37.9 million, up 59% year-over-year. And professional services revenue was $3.6 million, up 44% year-over-year.

During the third quarter, we saw continued momentum in winning new enterprise customers and expanding our relationships within existing accounts. We also had a very strong performance related to Atlas, not only due to the rapid growth in new customers, but also resulting from expanding use by existing customers. In the third quarter, Atlas represented 8% of total revenue, up from 1% during the last fiscal year.

In addition to our strong net customer adds and expansion activity, we also recognized approximately $1.3 million of revenue that we had not anticipated during the third quarter. The largest portion of this was related to bundled services subscriptions. When we sell software and services on a bundled basis, we do not begin recognizing subscription revenue from customers until the services have commenced. In Q3, this led us to start recognizing revenue from these customers in the third quarter versus our expectation that they would begin in the fourth quarter.

We continue to see strong global demand for our offerings. During the third quarter, we grew our customer base by approximately 600 customers, bringing our total customer count to over 4,900, which is up from over 2,600 in the year ago-period and over 4,300 at the end of last quarter. Of our total customer count, over 1,400 customers are direct customers, up from 22% in the year-ago period. The growth in our total customer count is being driven, in large part, by Atlas, which had over 2,600 customers at the end of the quarter versus 1,900 at the end of the second quarter.

It should be noted that we are seeing existing Enterprise Advanced customers expand their relationship with us by deploying Atlas for additional workloads.

We also continue to see healthy expansion from existing customers. Our net ARR expansion rate in the third quarter remained above 120%, consistent with prior quarters. We ended the quarter with 320 customers of at least $100,000 in ARR and annualized MRR, which is up from 296 customers in the second quarter and 220 in the year-ago period.

Driving expanded adoption and spend among existing customers is a key component of our growth strategy. For example, as outlined in our S-1, our fiscal 2013 new customer cohort grew their ARR with us by 4.1 times through fiscal 2017, while our largest customers have expanded multiple times more than that.

Moving down the P&L, I will be discussing our results on a non-GAAP basis, unless otherwise noted. Gross profit in the third quarter was $30.7 million, representing a gross margin of 74.1% and a 70 basis point improvement over the year-ago period. Gross margin was ahead of our expectations in the quarter, driven primarily by the revenue outperformance and the initial impact of optimizing infrastructure costs for Atlas.

As a reminder, Atlas represents incremental dollars of gross profit, given its monetizing community server. As of now, Atlas is still gross margin percent dilutive, and that will be a near-term headwind as Atlas continues to grow. But we are continuing to execute against our Atlas plan and are very pleased with how things are progressing so far, not just with the top-line growth but with the margin profile as well.

Sales and marketing expense was $26.3 million, an increase of 50% year-over-year, and representing 64% of revenue, which is down from 67% of revenue in the year-ago period. R&D expense was $15.1 million, an increase of 25% year-over-year, and a representing 36% of revenue, also an improvement from 46% of revenue in the year-ago period. G&A expense was $7.6 million or 18% of revenue, which was consistent with the year-ago period.

Our operating loss was $18.4 million or a negative 44% operating margin for the third quarter, which was a meaningful improvement from a negative 57% margin in the year-ago period.

We're pleased with our ability to generate this strong operating leverage while continuing to make investments to grow and expand our business. Net loss in the third quarter was $18.5 million or $0.44 per share based on 41.7 million non-GAAP weighted average shares outstanding.

Turning to the balance sheet and cash flow, we ended the quarter with $289.1 million in cash, which includes approximately $202 million of net proceeds from our initial public offering. Short-term deferred revenue was $92.4 million, up 66% year-over-year, while total deferred revenue of $114.8 million was up 55% year-over-year.

We believe long-term trends in deferred revenue are directionally correlated to the underlying momentum in our business. That said, as Atlas continues to become a larger portion of our business, it is important to appreciate that its usage-based model does not generate meaningful deferred revenue. In addition, quarter-to-quarter comparisons of deferred revenue can also have some level of variability due to timing events that may occur.

Operating cash flow in the third quarter was negative $10.3 million. After taking into consideration $88,000 in CapEx, free cash flow was negative $10.4 million in the quarter.

I'd like to turn to our outlook for the fourth quarter and the full fiscal year 2018. Beginning with the fourth quarter, we expect revenue to be in the range of $42 million to $42.5 million. Non-GAAP loss from operations is expected to be in the range of $21.5 million to $20 million (sic - see press release, "$21.0 million"), and non-GAAP net loss per share to be in the range of $0.43 to $0.42 per share based on 50.4 million weighted average shares outstanding.

For the full fiscal year 2018, revenue is expected to be in the range of $151.5 million to $152 million. Non-GAAP loss from operations is expected to be in the range of $76.5 million to $76 million, and non-GAAP operating net loss per share to be in the range of $1.77 to $1.76 based on 43.2 million weighted average shares outstanding.

To conclude, MongoDB delivered strong third-quarter results in our first quarter as a public company. We are continuing to make key investments in sales, marketing, and R&D to drive growth, as we are in the very early stages of capitalizing on the large opportunity in front of us. We feel great about our business, and are very well positioned for the future.

Now let me turn it back over to Dev for a few closing words.

Thanks, Michael. So as you've heard, we got off to a great start in our first quarter as a public company. We further demonstrated our position as the leading modern, general-purpose database in a massive $45 billion market. We continue to see a positive response from customers and continue to generate best-in-class growth.

I joined MongoDB as CEO over three years ago because I believed it was a unique opportunity to build a special, category-defining software company. Three years later, it's clear we have a huge market, strong product market fit, and a long runway for growth.

Finally, I'd like to take a moment to thank all our employees for their hard work and dedication. We've built an incredible business and culture. I couldn't be prouder of what we've collectively accomplished, and I know the best is still yet to come.

With that, we'd like to open it up to questions. Operator?

(Operator Instructions). Richard Davis, Canaccord.

This is actually DJ Hynes on the call for Richard. I wanted to ask you about new business generation. What percent of new business is coming from incremental workloads versus legacy migrations? How do you see that trending over time?

What we had said in the roadshow during the IPO was that we saw about 30% of our business coming from legacy migrations. Last quarter was again consistent around that figure, so about -- a little less than a third of our business is migrations, and the rest is around new workloads that customers are deploying.

Okay. And you think that that stays pretty steady for the foreseeable future?

Yes. It's not necessarily a metric we track explicitly, or manage our business to, because obviously we're -- we see such a big opportunity in front of us. But we don't see -- there may be some variability based on some large deals, but we definitely see that to be generally in line with how the business will come in the future.

Yes, makes sense. And then one follow-up on Atlas. From all the qualitative commentary, it sounds like it was another good quarter for Atlas with the customer adds. I'm curious: some of the trends in the metrics that we had been seeing that were cause of Atlas, right, with subscription revenue per customer trending down and gross margins trending down, kind of reversed in the quarter. So wonder if you can give us some color on what drove the reversal in those trends.

In general, we've seen strong performance really across the board. It was a strong quarter for both new customer adds as well as expansion within existing customers. To your point, certainly it was a particularly strong quarter for Atlas, in particular, as we saw a growing number of customers embracing our as-a-service model.

I think that we've seen both new customer adds in terms of the raw customer count of Atlas growing. But we're also seeing, even though it's early days, very attractive underlying cohort expansion within Atlas. We're seeing actually even greater land and expand characteristics than the already-strong behavior that we see in our annual subscription business. So we're benefiting from that as well.

And then I would also say we are seeing a number of customers who are already Enterprise Advanced customers expanding their relationship with us, and adding Atlas and a managed offering for additional workloads of theirs.

Yes, that makes sense. Okay. Thanks, guys. I'll pass the line.

Sanjit Singh, Morgan Stanley.

Congrats on the first quarter as a public company. Really nice set of results here. I had a couple questions for Dev, and then maybe a couple for Michael. Since it's the first quarter, Dev, maybe you can give us a sense of historically what has been the use cases/workloads that have driven the business, or accounted for the big chunk of revenue historically and the types of use cases that are coming on board today. And where -- what are some of the use cases that could come on board in the future? If you can -- any thoughts on where the growth is coming from would be helpful.

We typically see three types of applications in most enterprises. We see systems of record, which could be your HRIS, your payroll, your general ledger; and maybe custom apps around your billing systems and so forth. We see systems of engagement that tend to be typically how customers engage with their users, their customers, their partners. And they tend to be, in many cases, revenue-generating applications.

And then we see systems of -- there's this new genre of applications called systems intelligence, where people are building machine learning and AI-based applications. And that obviously is still a very small footprint today, but an exciting new area.

Historically, we engage with customers around system engagement first, around a new workload. The obvious reason, one, is system engagement applications tend to have a high rate and pace of change. People are adding new features to respond to new market opportunities, to respond to new competitive threats; so like e-commerce systems and so forth, mobile applications, et cetera. And then as they get used to -- and that's typically for a new workload, because obviously, by definition, it's less risky to start with a new workload.

And then as they get more and more comfort and experience with MongoDB, we start seeing them deploy us for systems of record applications. Typically those tend to be migrations of existing workloads. So it could be a trading app on Wall Street. It could be an order booking application, how people capture orders. It could be something in that genre. And they tend to be migrations of existing use cases.

And I would say there's been no real change. We still see that same pattern happening. And the more we penetrate a particular account -- that's why our model is land and expand and expand model. As we continue to further penetrate our position in a particular account, it tends to be a more -- a higher predisposition to start migrating existing applications.

That's super-helpful. And just a quick follow-up there. Is there anything from the technical architecture perspective where you can't address the use case today but may address in the future? Any sort of -- is there sort of a roadmap gap today that you're planning to fill that would open up even more use cases down the line?

Yes, I mean no. We definitely believe that we are -- and actually there's a wide breadth of use cases, wide breadth of customers, wide breadth of industries that our customers are part of that. So we feel like we're a general-purpose database today. But clearly there's maybe some unique set of features or capabilities that we don't have today that we can address.

But the way our product planning process goes is we see that demand coming in and then we prioritize where we think we're going to make the biggest impact. And we try and bridge that gap as quickly as possible. In some cases, we tend to come out with a major release every year, so our rate of pace of innovation is quite high.

Got it. And then, Michael, maybe one for me, and it goes back to Atlas again. I appreciate the heads-up on the gross margin. Can you just review? As Atlas is 8% of revenue today, but as that increases as a percentage of your [overall] revenue mix, in terms of the impact on metrics such as billings, revenue, and cash flow, could you review what the impact could be there? And again, any sort of comment on what type of renewal rates you guys have been seeing now that it's been out for 18 months?

Yes, sure. So, Atlas, just to ground everyone -- the main difference, while it's still a subscription product, is it's billed monthly based on usage as opposed to flat fee for a term license. Just to ground everyone in that. So from a revenue recognition standpoint, it's fairly straightforward. It's consumption-based. It's based on the actual usage as opposed to a ratable revenue recognition treatment. But assuming the same amount of usage over a period, the revenue recognition would look pretty similar.

Cash flow is a little bit different. It is more monthly in arrears. It's less of a deferred revenue treatment. It doesn't generate meaningful deferred revenue, as opposed to a customer who's paying annually in advance for a subscription.

And then billings, which is not a metric that we use internally, but I know externally is valuable, would have that knock-on effect of it not flowing through the deferred revenue in the way that we just discussed.

On the renewal rates, we are seeing very strong cohort behavior for Atlas customers. It is still early days, so we don't want to give specific numbers and we want to get some more seasoning in the cohorts. But we are seeing much broader, much higher, net expansion out of a cohort of customers. And that's a lot of what's -- that's one of the many factors that is contributing into the strong growth of Atlas.

Great. Thank you, Michael, and congrats to the team.

Heather Bellini, Goldman Sachs.

Welcome to the public company realm. Wanted to just --

Thanks, Heather.

Thank you. You talked a little bit about AWS and the nice comments that Andy Jassy made. But obviously you also run on, as you mentioned, GCP and Azure. Just wondering if you could share with us in maybe some of that cohort analysis you're doing, or just kind of where you're seeing the greatest adoption of Atlas and kind of -- I know you need to love all of the platforms equally, but anything that would stand out in terms of just customer traction and where maybe the friction might be the least to adoption of Atlas. Thank you.

There is no question that the greatest amount of adoption is on AWS, just as a function of the fact that the AWS is orders of magnitude bigger than Azure or GCP. We are seeing a significant uptick in both of those two other cloud platforms as well. I would say in some -- I think GCP is a little bit ahead of Azure today, but it's still very early days. But the nice thing is that we're seeing customers transact and run Atlas on those cloud platforms. So they are really buying into the run-anywhere strategy, and that gives customers comfort.

And then as I think as we introduce new features -- today we have Cross Region Replication. In the future, as part of our roadmap, will be cross cloud replication. You could have workloads spanning multiple cloud providers as well. Right now, the bulk of the business is coming and being provisioned on AWS.

Great. Thank you very much.

Brad Reback, Stifel.

Dev, as you look down the road a couple of years, what percent of revenue do you think Atlas represents?

It's a really hard to sit here and give you any kind of definitive number. We are very bullish on the Atlas opportunity for a number of reasons.

One is just the appeal of these as-a-service models. Customers want to consume infrastructure as a service.

Two, the product market fit of Atlas has been really strong. Obviously we would not be seeing these kind of growth rates if it wasn't so strong.

And three, it really gives customers optionality; optionality in terms of running MongoDB in any environment and optionality on any consumption model. There may be certain applications of workloads that people still want to manage directly, and then maybe certain application of workloads that people want to deploy as a service. And we are seeing that actually today happen pretty quickly.

So I think this is not about just only betting or investing in one offering. We are continuing to innovate aggressively on our Enterprise Advanced product portfolio. And, in fact, many of the features we built on Atlas will continue to be embedded back into Ops Manager to enable customers to do more sophisticated things when they want to run private clouds. But this is really all about really offering customers choice on environment and consumption model.

Great. Maybe one quick follow-up for Michael. If Atlas grows faster than potentially expected, and given the cash flow dynamics of the product, does it matter that it might push out getting to cash flow neutral in the future?

It obviously depends on the magnitude of how much it were to grow faster. There certainly are some underlying cash flow dynamics. I think in the long run, we have enough levers that we're paying a lot of attention to the relative dynamics in the relative performance of the businesses. We are certainly making investments across the board, in sales and marketing to grow the top line, in R&D for the product roadmap.

All of that is in the context of a more than fully funded business plan. And so we think about everything in the context of our steady progression towards cash flow profitability, including developments as they unfold with market uptake, whether it be of Atlas or anything else.

Great. Thanks very much.

Raimo Lenschow, Barclays.

It's [Mohed Gogi] on for Raimo. Dave and Mike, appreciate getting a question here, and congrats on the quarter. So just staying on Atlas, one thing I found interesting from your comments was that Atlas -- you guys are seeing adoption not just in terms of landing new customers, but also customers who are -- who you have been using your Enterprise Advanced offering have been using Atlas, which resonates with the hybrid cloud sort of like narrative we have seen from other companies in this space.

So just curious as to if you can get more color as to what workloads or use cases you have seen from customers who are already using Mongo on-prem while they use Atlas. Is it just new born in the cloud application workloads? Is actually they are migrating some workloads on-prem to the cloud and using Atlas along those lines? So just any color there will be helpful.

Sure. So typically in the Enterprise Advanced product, we typically see more production environments, or in some test environments. But mainly they are mission-critical production environments that people are transacting with us to help them run and manage those environments using our proprietary capabilities.

When it comes to Atlas, Atlas is basically the monetization of our community server. So what we saw some of the early customers do is just move development workloads, people who are doing prototyping, skunk works, et cetera. Because many customers, even large customers say they don't want to have development workloads on-prem anymore because there's such a high degree of variability in usage of the compute platform that they want to get the benefit of an elastic platform like Atlas.

But then we've seen, as people have gotten comfort with Atlas, that we've seen customers transact as high as six-figure kind of commitments where people are really moving important, mission-critical workloads to Atlas.

So I think it really depends on the customer and what their issues or constraints are. Some customers are constrained by just their own operational support capabilities. Some customers are constrained by just provisioning enough compute capacity in their own data centers. Some customers want to move very, very quickly from a time-to-market point of view. It really depends on what's happening in that customer and what's driving the decision to move to Atlas.

So, the nice thing is that we're seeing broad adoption of Atlas and broad adoption of Enterprise Advanced. And again -- and the benefit to the development organization is they don't have to develop the application differently whether they run it on-prem or in the cloud. So in some ways they are future-proofing their application by betting on MongoDB.

Thanks, guys.

(Operator Instructions). Pat Walravens, JMP Securities.

This is Mathew Spencer on for Pat. Would you mind talking about some of the investments you're making in the salesforce; specifically, how are new sales reps ramping? And also could you remind us of what your coverage model looks like, and maybe where you're hiring most aggressively? Thank you.

Sure. So we have put a lot of thought and structure around our go-to-market model. As you mentioned in our prepared remarks, there tends to be three channels. There's the -- our direct salesforce, there's a self-service business, and there's our partner organization.

In terms of the direct salesforce, we are hiring in all markets: North America, Europe, and in the Pac Rim. And candidly, a lot of it's because the market is so large, it's really gated by the leadership we've put in place. Because we don't just want to hire a rep in a market without both the coverage of enough sales leadership to give them the support, as well as technical resources to support them in the sales process.

As you can imagine, we tend to focus on where we see the biggest demand set. So like in North America, we tend to focus on NFL cities. But even today, we don't have coverage for every NFL city, and we continue trying to expand our coverage over time.

The same is happening in EMEA. We have historically had a very -- a larger presence in the UK, but a limited coverage in the rest of the Continent. Now we've hired some new sales leaders who are helping us grow our footprint in places like France and Southern Europe in places like Spain and Italy, as well as Germany, which is a massive market unto itself. And then we've also hired people in the Benelux area. And we're looking to add more people in the Nordics. So again, we see -- this is truly a business that's not constrained by markets.

So it's really, one, finding the right quality of people and making sure that we have the sales leadership in place to support them in the ramping process, as well as the technical resources to help them prosecute a deal.

That's very helpful. Thanks and congratulations.

And with no further questions in the queue at this time, I'd like to turn the conference back over to Mr. Dev Ittycheria for any additional or closing remarks.

Well, I'd like to thank everyone for joining us on our first call as a public company. We appreciate your support. Thank you again.

Take care. Good evening.

And ladies and gentlemen, that concludes today's conference call. We thank you for your participation.