Cloud database provider MongoDB pulled in another impressive set of Q4 numbers, both in terms of increased revenues and the number of customers it is adding globally. CEO Dev Ittycheria also provided insight into the company’s investment plans for its data platform, citing the company’s long-term opportunity.
However, the short-to-medium term cannot be ignored and it’s unsurprising that the company’s presentation to investors included guidance on the unfolding Coronavirus pandemic - which is undoubtedly now an international health and economic emergency. You can find diginomica’s coverage on the COVID-19 impact here.
CEO Ittycheria addressed the issue at the start of the presentation:
Let me start off by saying that we live in a time of unprecedented circumstances. The global spread of the COVID-19 virus has created an extreme health crisis and resulted in the disruption of the lives of billions of people. The first priority for MongoDB is the safety and wellbeing of our employees and our customers. And we have been managing the business to that effect.
Michael [Gordon, MongoDB COO and CFO] will speak in more detail on how we expect this crisis to impact our financial performance. Our job as a management team is to keep steady amidst the turbulence while not losing sight of the long-term opportunity ahead of us.
Gordon highlighted that the impact of Coronavirus on MongoDB’s 2021 revenues could be up to $25 million. But more details on that later.
Firstly, the good news
In its fourth quarter, MongoDB brought in revenues of $123.5 million, a 44% year-on-year increase and above the high end of its guidance. For the full year 2020, it generated $421.7 million in revenues, a year-on-year increase of 58%.
Subscription revenue was up 46% year-on-year in the fourth quarter, and 61% for the full year. The company’s managed cloud product, Atlas, saw revenue grow 80% year-on-year in the fourth quarter, and now represents 41% of revenue.
It ended the quarter with 17,000 customers globally, over which 15,000 are Atlas customers. MongoDB has said that it anticipates revenues will hit $0.5 billion this year.
MongoDB CEO Dev Ittycheria said that MongoDB is well positioned for the long-term, despite the immediate consequences of the Coronavirus, because of the systemic changes that are happening in the deployment of cloud apps and data structures. He explained:
In the first decade, the cloud ecosystem largely involved moving existing technology stacks onto the new infrastructure paradigm. These forced developers to deal with a fragmented set of apps and infrastructure tied to discrete use cases, multiple APIs and data spread across many disparate silos. Developer productivity is impeded as they're unable to seamlessly leverage data for different needs. And these problems will only escalate as customers move more workloads to the cloud.
This experience led us to [what is] informing our data platform strategy that the apps of the future will dramatically expand in their functionality and scope. Future applications will enable continuous engagement and access to massive amounts of real time data among key constituents, be it users, customers, partners or suppliers.
Availability of instantaneous operational data along with insight in that data will increasingly drive business decisions. That means traditional operational workloads will need to incorporate additional functionality, such as real time analytics. In addition, as data on the edge continues to explode due to the increasing use of mobile and IoT apps, future applications will require the ability to effortlessly synchronize data between the edge and the core.
Finally, rather than dealing with a large number of complex interfaces, developers will require one unified interface, designed to bring together data at massive scale to build these new applications more quickly and efficiently.
Ittycheria said that he believes that MongoDB is well-positioned to benefit from this emerging trend. He added that MongoDB expects developers will look for their core operational database to extend into a full data platform that provides additional capabilities to “expand an application scope and functionality”.
However, despite the positives, COO and CFO Michael Gordon did offer some guidance on the likely impact of the Coronavirus pandemic. And rightly so. However, as he noted, the situation is still unfolding and it’s quite hard for companies to put any firm numbers in place. So the estimates should be assessed with caution, given the parameters are shifting on a weekly basis.
MongoDB is expecting a normalised business environment in the second half of the year, but Gordon said:
Our current assumption is that the disruption caused by COVID-19 will impact Q1 revenues by approximately $1 million to $2 million and fiscal ‘21 revenues by approximately $15 million to $25 million due to anticipated weaker bookings in the first half of the year.
To be clear, at this point, we are seeing minimal impact across our sales channels around the world, including closing transactions in the first quarter, even in the countries hardest hit by COVID-19. However, as a management team, we believe that it is now prudent and responsible to incorporate that into our outlook that we expect what could be a much more challenging economic environment in the coming weeks and months.
And in terms of investments going forward, MongoDB is going to plough ahead given the long-term opportunity. Gordon said:
With respect to our overall investment cadence, we have made the decision before the COVID-19 outbreak that we want to continue investing in the business aggressively to pursue our market opportunity. We're funding high-priority projects across the organization, including, first growing our sales capacity globally, which still remains in its early stages from a scale perspective. For context, even in the United States, we still do not have coverage in roughly a quarter of the NFL cities and only have two or fewer reps in half of the NFL cities. Given our strong historic productivity, we believe that the primary governor in productive capacity should be organizational capacity.
Second, continue investing in our marketing organization, particularly our product lead growth team, in order to continue to drive our self-service Atlas business and overall Atlas adoption. Finally, as Dev described in his remarks, continuing with robust R&D investments to both deliver on our data platform vision and to further enhance our core products.
Given the attractive long-term opportunity we have in front of us, we think it continues to be important and appropriate to keep investing in these high-return areas.