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Good day, and welcome to the MongoDB 4th 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.
Thank you, Don. Good afternoon and thank you for joining us today to review MongoDB's 4th quarter 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 Dave Inachuria, 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 under federal securities laws that 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 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 advantages of those enhancements. Our market opportunity and ability to expand our leadership position and drive revenue growth Our ability to maintain and up some existing customers, our ability to acquire new customers, our ability to expand our relationships with partners anticipated benefits 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 without 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 cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, Please refer to those contained in our 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 dotmongodb.com. A replay of this call will also be available there for a limited time.
The development release and time
of any feature or functionality described for our product remains our sole discretion. This information is merely intended to outline our general product should not be relied on in making a purchasing decision nor is the commitment, promise, or legal obligation to deliver any material code or functionality. Additionally, non GAAP financial measures will be discussed in this conference call. These are for the tables in our earnings release and the Investor Relations portion of our website. For a reconciliation of these measures to the most directly comparable GAAP Financial Measure.
And with that, I'll turn the call over to Dave.
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 4th quarter results, we generated revenue of $45,000,000, a 50% year over year increase and above the high end of our guidance. We ended the quarter with over 5700 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 a 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 business or at risk of being eaten by 1. 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 their digital strategy and 82% don't believe their companies are effective at using technology to advance their business.
One of the main reasons they failed is their inability to leverage their data. A study by Localis found that companies don't think they're good at using their data with more than 40% of CIOs mentioning that their data is too silos 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 and complex legacy infrastructure. Consequently, we're starting to see the beginning of a real platform shift. Where customers realized 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 power and flexibility of the document model.
Our platform allows our customers to put data where they needed 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 with the same unified experience for the developers. This allows customers to future proof their work by knowing that they don't have to rewrite their applications is 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, 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 2nd trade year Mongodb was the most wanted database by developers. This provides yet another data point that shows that MongoDB has clearly established itself as the database of the future in the hearts of 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 asset transaction support available in a single document to multiple documents. With asset support, MongoDB can now provide all of the same data guarantees of a legacy database coupled with database platform. We've already seen great success replacing legacy databases, which represents approximately 30% of our new business. Now with the introduction of asset transaction support, we believe there's no reason the 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 for legacy databases.
This was a must have because they store data and 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 neither set of guarantees to ensure that the data was properly and consistently entered or updated across all these tables. These guarantees are called Absa. They're a 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 were not comfortable using MongoDB for transaction heavy use cases felt this way primarily because they didn't fully comprehend that most data relationships can be modeled in the document or that transactions 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's no use case today where a 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 3 years. Four-0 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're 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 powerful land and expand and expand model and our 4th quarter results show that it's working. During the fourth quarter, we were excited to add new enterprise customers, including ASML Netherlands, Culture Amp live person, MicroStrategy, Pizza Hut, and the state of Maryland.
We also expanded our relationship with customers such as AstraZeneca, Cisco, Mount Sinai, Samsung, TIAA, and T Mobile. We had an exciting new customer win during the quarter with 1 of the 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 costs 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, the ability to run anywhere, including on the mainframe, as well as on the cloud and the endorsement of their preferred systems integrator. In the 1st few months after deploying EA, this customer has been able to significantly reduce mainstream consumption for this application, which translates into 1,000,000 of dollars in annual cost savings. Also this past quarter, we expanded our relationship with Freddie Mac. Who launched an initiative to modernize a number of applications that were previously built on legacy databases.
One application, the property appraisal tool held massive amounts of property and loan information, but was increasingly expensive and time consuming to update with their relational database. Leveraging MongoDB, Freddie Mac was able to collect information for a variety of different sources and in a variety of formats 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 availability of the database. In the months, since using MongoDB, Freddie Mac has seen an increase in developer productivity. Atlas delivered outstanding results in the 4th quarter, it represented 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 to continue to significantly expand their usage of Atlas. We once again saw a number of 6 figure Atlas transactions and are seeing a growing percentage of Atlas customers have committed to a certain usage levels. In 2nd quarters, we've gone from launching Atlas to creating a business that's entering fiscal 2019 with a revenue run rate of over $20,000,000. This is great validation of the opportunity for Atlas, and we believe we've only scratched the surface. Flexibility of Atlas has served as both a self serve solution that can attract new customers as well as the solution that customers can quickly scale over scale up over time is a key differentiator in the market.
A good example of this is Snagajah, the largest platform for hourly work in the U. S. With more than 80,000,000 registered value workers and 300,000 employee locations. Snagajov upgraded from community server to Atlas. Snagajob had successfully grown its business on community service due to the power of our platform, but as the business continues to grow, the overhead of active provision, configure, secure, backup and manage the infrastructure themselves detracted from their ability to focus on their own competitive advantage.
After evaluating Atlas, they recognize it would be significantly more cost effective to use Atlas than to manage their ever growing infrastructure themselves. Nagajob made a multi year 6 figure annual commitment to Atlas as the long term platform on which it can build innovative applications and scale its business over time. We believe that there are hundreds of thousands of other community server users like Snagajob that are great candidates to move to Atlas over time. In the fourth quarter, we also made significant progress with 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 the AWS SaaS sales alignment program, enabling the AWS Salesforce to drive MongoDB Atlas revenue through co selling and to get compensated for it. LongDB and Microsoft also launched a new co sale program for MongoDB Atlas and Microsoft Azure, which enables the Microsoft Salesforce to do the same. Our cloud partnerships are truly win for them. Finally, Tire Consulting Services developed a mainframe modernization practice built around MongoDB and elevated MongoDB as the top 20 global strategic partner. As I look to 2019, I couldn't be more excited about the opportunities ahead.
We have a map market opportunity, which IDC estimates will be over $63,000,000,000 by 2020, a highly innovative product, a high performance go to market model, and the team and the credibility to execute. We believe we're still in the early stages of establishing MongoDB as a seminal software franchise, with the opportunity to sustain high levels of growth for a long period of time. When we 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: continue to invest in our strategic data platform. Transactions, which I discussed earlier, is just part of the many innovations coming with at least 4.0.
We're significantly investing in Atlas, adding new capabilities to drive adoption expansion, as well as enterprise grade up sell 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 freeze developers from undifferentiated and cumbersome back end coding like handling user logins and highly granular access to data. Or integrating with other third party services like Twilio or Stripe or running and scaling application servers. We're also making investments in mobile and expanding the aperture of what developers can do with our platform, including some very interesting data visualization capabilities that we plan to launch launch later this year.
The second is driving strong revenue growth through expansion of our sales capacity and related marketing investments, We're at the very early stages of penetrating 1 of the largest marketing software, which is ripe for disruption. In fiscal 2019, we plan to continue to expand our direct sales team in order to expand it to new markets as well as deepen our penetration where we already have sales coverage. We're attracting world class sales talent and we'll be looking to add sales reps who have experienced closing larger, more strategic deals. 3rd, driving deeper relationships with partners to elevate MongoDB's customer mind share. We're seeing increasing traction with leaders in digital transformation, particularly the largest systems integrators in the world, and we believe that their role as trusted advisors for digital transformation can help elevate our positioning among fee level executives and 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 4th, 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, leadership and leadership development programs, talent 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. Call of Stella Torrey, our Chief Revenue Officer, will be leading MongoDB at the end of our 1st fiscal quarter to become the CEO of our private technology company.
Over the last three years, Carlos has helped MongoDB deliver rapid growth at scale and most importantly, for the long term, he has built a world class sales organization that positions MongoDB incredibly well for the future. I am personally excited for Carlos as C and I worked together closely over the last 13 plus years, 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 will direct the report to me in addition to my first experience building high performance sales organizations, we also have a deep sales leadership bench, most of whom I've 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 5 different public software companies. John and I worked together in leadership roles at 2 of those companies, so he's someone I know very well. John has been closely engaged with our sales teams to joining the board a year ago, year and a half ago, and he'll increase his level of involvement and support 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. Thanks, Dave. As mentioned, we're very pleased with our 4th quarter results, which capped a strong year for MongoDB.
I'll begin with a detailed review of our 4th quarter and full year results, and then finished with our outlook for the first quarter full year of fiscal 2019. Total revenue in the quarter was $45,000,000, up 50% year over year, subscription revenue was $41,900,000, up 54% year over year, and professional services revenue was $3,200,000, 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 fourth quarter of last year, and representing an annualized revenue run rate of over $20,000,000. During the fourth quarter, we grew our customer base by approximately 800 customers, bringing our total customer count to over 5700 customers, which is up from over 3200 customers in the year ago period and over 4900 customers at the end of last quarter.
Of our total customer count, over 14.50 customers are direct customers, up more than 20% from the year ago period. The growth in our total customer count is being driven in large part by Atlas, which had over 3400 customers at the end of the quarter compared to over 2600 at the end of the quarter 3rd quarter. The growth in total customers includes growth in 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 customer our net AR expansion rate remained above 120 percent in the 4th quarter.
We ended the quarter with 354 customers with at least $100,000 in ARR and annualized MRR, which is up from $320,000 in the 3rd quarter and 2 and up from $246,000 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 $1,000,000 in annual recurring revenue, up from just two customers at that level 2 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 represents a small fraction of their total database spend. Which represents a large and attractive growth opportunity for us over time.
Moving down the P and L, I'll be discussing all of our results on a non GAAP basis unless otherwise noted. Gross profit in the 4th quarter was $33,000,000, representing a gross margin of 73% and consistent with the 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 it is monetizing our free offering. Our operating loss was $21,100,000 or a negative 47% operating margin for the 4th quarter which was a meaningful improvement from a negative 56 percent 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 fourth quarter was $20,200,000 or $0.40 a share based on 50,300,000 weighted average shares outstanding. Looking at our P and L over P and L results on a full year basis, we generated total revenue of $154,500,000, which was up 52% year over year.
Gross profit was $112,900,000 or 73% gross margin, which is up 100 basis points year over year. Finally, operating loss was $76,000,000 or a negative 49% operating margin, which was an approximately 1500 basis point improvement year over year. Turning to the balance sheet and cash flow. We ended the quarter with $279,500,000 in cash, cash equivalents, short term investments and restricted cash. Short term deferred revenue was $114,500,000, up 46% year over year, while total deferred revenue of $137,400,000 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 billed monthly in arrears versus the annual and advanced billing terms we typically see in our EA customers. Lastly, quarter to quarter comparisons of 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 $7,700,000 after taking into consideration approximately $400,000 in CapEx, Free cash flow is negative $8,100,000 for the quarter.
I'd now like to turn to our outlook for the first quarter full year of fiscal 2019. Beginning with the first quarter, we expect revenue to be in the range of $45,500,000 to $46,500,000 including $3,000,000 to $3,500,000 of professional services revenue. Non GAAP loss from operations is expected to be in the range of $22,000,000 to $21,500,000 and non GAAP net loss per share to be in the range of $0.44 to $0.43 per share based on 50,400,000 weighted average shares outstanding. For the full fiscal year 2019, we expect revenue to be in the range of $211,000,000 to $215,000,000, Non GAAP loss from operations is expected to be in the range of $84,000,000 to $82,000,000 and non GAAP net loss per share to be in the range of a dollar 66 to $1.62 per share based on 51,500,000 weighted average shares outstanding. In closing, we finished a strong year with a strong quarter excited about the opportunities that lie ahead in fiscal 2019.
And with that, we'd like to open up for questions.
And we'll take our first question from Sanjit Singh with Morgan Stanley.
Thank you for taking the question and congrats on the 50% growth this fiscal year. Very impressive. Maybe I just want to start with Dave on the asset transaction, subject. Could you give us some examples of, what use cases are now available? Or maybe types of applications that are now available that weren't before prior to this, the introduction of, Florida.
Yes. So, a a good example would be, say, an e commerce use case where, say, someone is ordering something some widget and associated with that order is some inventory management system that has to deprecate the, number of widgets that they are holding at a particular location. So in that situation, you want to have a transactional guarantee from ordering a particular widget as well as decrementing the number appropriately in the inventory management system. So those two This data sources would be in 2 separate collect document collections and that's where asset transactions would be multi document asset transactions would be very helpful.
That's very helpful. And then the yeah, no, that was great. It makes a lot of sense. Michael, in terms of, I mean, we're obviously seeing a lot of traction with with with Atlas, the 11% of revenues. Any sense of the pace of, of how that revenue contributions should evolve next year beyond?
Yes. So we're not giving, specific guidance number for Atlas and Fiscal 2019, but we've been very pleased, with the performance and the results of Atlas so far. I think if you think more holistically though, what we're a primary goal sales channel is getting customers to understand the value proposition of MongoDB. And as Dave mentioned, one of those three key pieces is the ability to run anywhere. And so we're less focused with whether customers are deploying on prem, in cloud, consuming in a subscription model or in a consumption model, but really we want to be focused on having MongoDB appreciated and permeated throughout the organization.
And so that's really the key focus. And so far, the results show that we're having success with that.
Great. That makes a lot of sense. And then then maybe just a a follow-up, maybe a 2 part follow-up to, to to Atlas. Any plans to release a more commercial version of Allison? I know it's monetizing with the free offering today, but any plans to release some of maybe an enterprise version of Atlas, this fiscal year.
And the second part of that question would be,
if you can give us
a sense what the impact is on your invoice duration from Atlas speak, constituting a a bigger part of your your bookings mix would would be very helpful.
Yes, sure. So, so we definitely are, as part of our roadmap, have a very robust roadmap in terms of adding new capability to Atlas. And so unlike EA, where you get all the proprietary features, literally out of the box, with Atlas, we will offer more of an a la carte model where customers can pick and choose new features and capabilities that will be an upcharge to the base offering. So those could be things like, security offerings or unauditing, things like, you know, connecting to sophisticated key management systems that the particular cloud provider may offer, things around like, you know, enabling connection to your data, your BI tools through a BI connector that we launch, on Atlas. So those will be just a small smattering of things that we had planned.
We have a very robust plan, but unlike EA, where you could basically get all the proprietary features as part of the of the licensing with Atlas will be more of an a la carte model, which I think will attract customers, the broadest set of customers who may pick and choose what capabilities they want now versus later. I'll let Michael answer the second part of that question.
Yeah. So if you think about the models, over time, they'll more converge, even on their financial attributes, not just on a product functionality standpoint, today and historically, there have been kind of 2 main aspects that are different. There's the margin profile, and then there's sort of the billing and the cash flow dynamics. I think that as evidenced by the result, we've continued to make progress and better progress than we had originally forecast on the Atlas margin. There's more work that we want to do there, and we'll continue to do.
But so far, we're very pleased with that progress. On the billings and cash flow side, Atlas can be consumed in a couple of different ways. There's the self-service component to Atlas, which is very much consumption based and paid in, monthly in arrears and invoice monthly in arrears. So that obviously has an effect, on deferred revenue and ultimately the billing calculation that you all will do. But we're also seeing increasing traction for the Salesforce for applications where they don't need the full advantages, they don't need the full functionality of Enterprise Advanced being able to sell, Atlas today.
And some of those relationships are being struck on a paid in advance basis. And others are being struck on a monthly invoicing basis.
So there's sort of a mix across the board, if
you will. From a macro perspective, we don't see the increasing mix of Atlas changing our timing to get to free cash flow positive. The self serve customers do our monthly interreers. And so that is different, and some sort of the calculated billings, which we don't focus on as a management metric, but you should understand it's certainly a billings and cash flow impact of that in the short term.
Our next question will go to Raimo Lenschow with Barclays.
Dee, can you talk a little bit about the asset compliance side? It seems like it's very important point that you mentioned on the call. Do you see that playing out in the market in terms of, I mean, it's something that for a no SKL database is kind of unusual. And so the how do you expect it to play out with customers? Are they kind of doing all lots of tests now to see how they can use it?
Do you see kind of a fast uptake or like it's kind of unusual development that kind of I struggle to a little bit to understand how that's kind of impact your market?
Sure. So, customers actually are have been incredibly excited by our announcement because candidly, you know, when you've grown up knowing databases and it's been drilled into your head that asset transactions is an incredibly important feature that every database must have. But you are very attracted by the power of MongoDB's document model and its distributed architecture. Some people still feel a little nervous about using MongoDB for many use cases, even though, you know, they don't really need, multi document as a trans support. So the first thing that does, it just gives customers real peace of mind.
When we made the announcement, literally our salespeople got calls from lots of people, we had meetings in a very short period of time with CIOs. In fact, I had a meeting with 1 CIO, and he said, geez, if I could rebuild my application portfolio, I'd never have to use another relational database. And so, so the receptivity of that has been very strong. And the reason it's really strong is that you know, they they literally can have the cake and eat it too. They can get all the data guarantees that they're used to with the legacy database.
With the power of the scalability, the availability and the ability to be very sophisticated about where you put your data for things around GDPR and other compliance issues. Or things around if you have a globally distributed user base, moving the data that's most relevant to them to particular geography for low latency access. That that becomes incredibly powerful for customers. And and as I mentioned earlier, there are some niche use cases where it actually becomes quite important. So now with the availability of multi document as the as the transaction support, we believe that there's not one use case.
That we can't do better than a traditional database.
Okay. That's, yeah, that's why I thought like it's, that's pretty exciting actually. And then can you talk a little bit to, I know we live in a world of coopetition and, if I listen to EWS at the conference in November. There was more noise around NoSQL as well, but then I see also now the partnership. Can you just kind of see how you can you talk a little bit about how you see that playing out?
Yes. Amazon is clearly an important partner of ours and so are the other cloud providers as well. The announcement we made with the AWS marketplace is that, you know, their customers can actually buy Atlas through the marketplace and use their own credits that they may have already kind of committed to with Atlas to apply towards list, which is very compelling, as well as get billed directly by Amazon for those services. Moreover, as we as I mentioned in the prepared remarks, we also have, joined their SaaS alignment program where their own salespeople get commissioned for selling outlets. So, Amazon is a company that really allows its teams and its groups to operate fairly independently and top on, autonomously.
And so the key teams that in the, in the core hosting group, The people in the Lambda group, their people in a lot of other groups are very excited about how it's clearly the people who offer a competing database offering, you know, are not necessarily, you know, our partners, but overall Amazon does a very good job of managing this relationship and very excited about the partnership AWS.
Okay. And last question for me, can you the increase of number of large deals seems kind of it seems really exciting. Could you talk a little bit about what you see in the field? Was that kind of a special year this year or like because 20 versus 2 seems like a big jump?
Yeah, I think it speaks to a couple of things. 1, I think it speaks to the, maturity of the product where people have seen the product evolve very quickly over the last few years and have been really can, are comfortable using MongoDB for mission critical workloads. It speaks to the sophistication of our sales force and our go to market model where we can be more effective in capturing customers. And also speaks to our land and expand model where once we get in, as Michael mentioned, we still have such a small percentage of the wallet share that those customers spend on database software. And given the very clear and compelling benefits of MongoDB's features and architecture, our sales teams are being very aggressive in going after those existing workloads that are running on traditional databases.
The last thing I would say is that given all this, we're actually getting more bold and being more aggressive in basically going higher earlier in the engagement cycle. Rather than just starting lower with, say, a department level or a certain business level, business unit level kind of group. And so that's also starting to pay dividends in terms of larger deal sizes. And as you know, while we don't disclose our deal sizes over time, they've definitely trended up into the right we feel like that trend is not going to stop anytime soon.
We'll take our next question from Heather Bellini with Goldman Sachs.
Hi. Most of my questions at this point have been answered, but I wanted to dig a little deeper on what Remo just said in regards to the $20,000,000 with customers over a 1,000,000 in ARR. I'm just wondering, is there a commonality amongst those customers, whether it's by vertical that they're in or type of application that they're deploying that you could share with us. And also just given the rapid adoption and uptake of Atlas, just wondering, I think you got asked a little bit earlier about the type of apps there. But again, just wondering if there's commonality amongst the customers that you're seeing that you share with us.
Thank you.
Yes. So the short answer is there's no commonality in terms of the type of customers. We're seeing that financial services. We're seeing that in telecom. We're seeing that in tech.
We're seeing that across the broad set of vertical industries. I think the commonalities, frankly, the ability for us to go high and connect and be able to, you know, clearly articulate the value of moving to a much more modern and cost effective and flexible platform. And when that message resonates with the senior people in the organization, they tend to move much more quickly and aggressively and tend to, be more forceful in driving a lot of the migrations or the new use cases that they're going after. So we, as an organization, are actually starting to institutionalize that across the entire sales force, where we believe that for the same amount of time and effort, we can actually get a better yield out of the out of sales organization by starting higher in the organization. So that will take some time for all our sales people to get there.
But we are very excited about the opportunity. And it doesn't hurt to have a lot of great customer proof points. Some of the most sophisticated demanding customers are using us for very, very important use cases. And so that gives customers even more confidence in going with MongoDB.
Yes, I'd say the other thing if you're looking for patterns that would tend to the sort of the expression of the strategic piece that Dave's talking about is the number of applications that a customer is running. Like, it's unusual that it would be a single application that is at that level of spend, but it's that you're you've broken through from that initial application you become more strategic and are starting to permeate the balance of the organization, will you start to see the momentum and the relationships expand to that kind of size?
Great. Thank you.
We'll take our next question from Richard Davis with Canaccord.
Hey, thanks very much. Actually, to corroborate your answer to Reno's question, I was actually talking to a CTO who uses Google Dialogflow, no sequel, an Atlas on AWS. So I think you're right. It's a kind of multifactor world. World for a long time.
So one quick question, just a tactical question on technology and just a real quick question on numbers. So tactical question, How hard is it to, you know, do kind of a port over, you know, stumbling block that you face is, you know, a live migration of of to a new version of of Mongo or from an old version to a new one. And so how have you solved that question? And then on the numbers, just we ran back of the envelope numbers. We get, like, a LTV to CAC of, like, 2 to 1, and and I don't know if that's right because we're outsiders.
Are you able to do you think you can get the 3 to 1 or what what's your thoughts on that? But two quick questions. Thanks.
So on the first question. We actually, one of the design principles that's been from the get go here at MongoDB is to really have customers not suffer any downtime. So whenever they migrate from one release of MongoDB to another release, we literally do it in a very seamless graceful way. We do a node by node where we never have to take the application down. And we've also built tools to help customers do that in a way that helps them through the process.
And we also have a professional services team that can also help with planning executing those migrations. But in general, it is a far easier and less owner's process than doing it with a legacy database. And then in terms of your second question,
nothing to calculate it. Yeah. So so, Richard, here here'd be my high level. Obviously, we don't give out, you know, specific numbers on that. I think what we shared in the context of the IPO is the contribution margin analysis which showed some pretty attractive returns on the investment, investments that we're making in sales, and attractive paybacks.
But I think importantly also showed significant growth, even, you know, 1, 2 years, into a cohorts, you know, life cycle. And so given the strong retention and the strong net ARR expansion rates, when we look at the unit economics, they're, they're very, very attractive. I think the one thing that if you're kind of taking a snapshot in time, that burdens the current, you know, a current point of view is we still have a very high percentage of the sales force that is ramping. And so those people are not productive as we're, you know, in the early stages of trying to capitalize on the opportunity in front of us. And so they would burden, any kind current period analysis, but even when we do that analysis today, we're very pleased with the returns that we're getting on the investments that we're making in the sales and marketing efforts.
Got it.
No, that's super helpful. Thanks.
We'll go now to Pat Walravens with JMP Securities.
Oh, great. Thank you. Congratulations, you guys. So my first question, Dave, would be around your new head of sales and what you're looking for in in that candidate. And then, sort of related, you know, what what what degree of changes do you have planned to territories and comp plans and things like that in fiscal 19?
Well, the good news is that all the territory planning and the comp plans have already done. And we typically start that process in Q4 and pull that out in early Q1. So that's already behind us. So, and it's just, you know, there tend to be some incremental changes around the edge of the plan. We get feedback on what happened last year and incorporate that and the drills that we're trying to drive this year.
So that's point number 1. And point number 2, This is a pretty interesting business and a fairly unique business because we're selling to a very sophisticated technical audience, but we also have to sell high. So we need we need people, who know how to kind of fully communicate the business value high, but it can also kind of engage with technical stakeholders, developers, architects, and so forth to really ensure that they're fully bought in and understand and appreciate the power of our architecture. And then the other thing about our business, unlike say an application software or frankly even like hardware, is that this is a little bit of a conceptual sale in the sense that you can't really see feel or touch MongoDB. It's really driving an outcome, whether it's helping you build out an application that's giving you insights into your business and so forth.
So you have to be comfortable selling, you know, making a conceptual sale And, and so that's also an important skill. The third thing is that we have a very strong sales organization, but the management bench is very deep. I was actively involved in helping the recruit senior leaders to the sales organization, both, you know, at Carl's direct report level and one level below. So I have a lot of intimacy around the organization, and I'm very proud of what we've built. So I don't feel the need to make any wholesale changes and so forth.
And I don't feel in the rush to go hire someone tomorrow. Like, we want to be very thoughtful As I mentioned, we're going to do search and look at both internal actual candidates.
Okay, great. And my second question is broader. I I'd love to hear you just comment on sort of what you're seeing in terms of broader trends in the database market and and how Mongo is, inserting itself into those conversations, to sell, you know, in particular, You know, are are people, listening and shifting sort of these core database workloads?
Yes. So I would say that we're starting to see the beginnings of a real platform shift. What's interesting is everyone's trying to use technology as an enabler to drive a competitive advantage. And invariably, they recognize that being able to leverage their data is important part of being able to achieve that goal. But what they typically find is that data is not an enabler, but a blocker.
And it's a blocker because it's kind of trapped in legacy infrastructure. It's very solid across the organization. And so we're starting to see people really put a lot of focus around app modernization or legacy modernization And that's also obviously buffeted by the desire to potentially move to the cloud as well as desire to roll out new use cases new UCAs around, like, machine learning, AI, even things like IoT, etcetera, are driving the need to be much more effective in using data. And so we're starting to see a real focus on doing that. The second thing I would say is that there seems to be a real antipathy towards the existing incumbents.
And so that's also driving a lot of senior level stakeholders to contemplate going to a new vendor. And I think we are well positioned. And as you know, we have massive customer I'm sorry, developer adopt We're the only database company to go public in the last 20 years. We've raised a lot of capital to drive our business. And so, we basically feel very well positioned to pursue this opportunity and that's resonating with customers.
That's super helpful. Thank
Our next question will go to Jack Andrews with Needham.
Hi, thanks for taking my question. I just wanted to follow-up on some of the other commentary. You mentioned that you're engaging higher in the organization through your sales process. So in these customer conversations, do you still need to spend any time, evangelizing the overall technology value proposition? Or did customers get it at this point?
And how would that compare to these conversations maybe 6 or 12 months ago?
It's a good question. So I would say it kind of expands, across the board. So we may be talking to customers who are very intimate with MongoDB and then now they're just looking to really expand their use of MongoDB in a very aggressive way to all the way to the other end where people have very limited understanding. And so there's needs to be a lot of education around the document model, the value of the document model, the value of our distributor architecture and also the fact that they have a variety of options. And actually, that's one of benefits among the DB is that they have optionality to provide themselves on prem, provide themselves in the cloud, or go to, a more consumption based model like Atlas or do some hybrid combination thereof depending on what workloads they want to use where and when.
But that does it can require some education. What we find is that if you go high and really link ourselves to some of the more important business initiatives, people may be trying to improve, you know, their the experience that they offer to their customers, people may be trying to build out new products and services And so if you did more, we can tie ourselves to some of the business initiatives that they're trying to drive and explain to them how MongoDB can help address that problem, and then explain why we're the best solution to do so. That tends to accelerate deals as well as the size of those deals. And that's essentially what our sales team is trying to do now.
Sure. Appreciate the color. And then I guess as a quick follow-up, could you just touch on the mainframe modernization practice that Tata is building out. I mean, how prevalent, do you think that these mainframe modernization can be as a use case moving forward?
I think they're huge. And I'd I'd say that, you know, just just a little bit of color, my background, I used to be the president of BMC Software, And while I didn't run the mainframe business, I saw that business pretty up close and I was always amazed how that business kind of chugged along I think we're reaching an inflection point frankly for a number of reasons. One is that it's just the mainframe developer community is candidly retiring. And so finding people who still wanna build apps on the on the native platform, on the native mainframe, you know, it's hard to find. IBM actually, funded us to port MongoDB to the Z series Linux.
So as I mentioned in that one use case, we had a car rental company who had a very complex reservation application that was built on the on a legacy database that they ported to MongoDB on the mainframe today, but then it gives them real optionality to then move off the mainframe to either go on prem or off the way to the cloud. We've seen, customers like Barclays who basically, basically moved up mission critical consumer applications in the UK off the mainframes of MongoDB. And candidly, we're starting to see that all over the place. I think people have started to realize that, that the limited utility and continue to invest the mainframe And so they're very open and very interested in trying to use MongoDB to help modernize that platform.
Great. Thanks for taking my questions.
That does conclude today's question and answer session. At this time, I'll turn the conference back to Mr. Dev Inacharya for any closing remarks.
Yeah, again, I want to thank you all for listening to our earnings call. We're 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 their 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.
That does conclude today's conference. Thank you for your participation. You may now disconnect.
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