MongoDB saw its stock price rise in after hours trading this week after it turned in a strong set of Q2 results, which beat analyst expectations. Despite market uncertainty because of the COVID-19 pandemic, CEO Dev Ittycheria highlighted strong customer wins, a stronger rate of growth compared to Q1 and praised the company's ability to sell effectively during lockdown.
MongoDB is a NoSQL database provider, which makes use of the JSON document model to support internet-scale and digital applications. The company has seen rapid growth in its database-as-a-service offering - Atlas - in recent years and has found success from buyers looking for less rigid data models to support digital businesses.
In Q2 MongoDB announced total revenue of $138.3 million, which is up 39% year-on-year. Atlas revenue now accounts for 44% of total revenue and is up 66% year-on-year.
The company also added 1,800 customers in the second quarter, bringing the total number of customers to 20,200, which is up from over 15,000 a year ago. This customer growth is largely being driven by Atlas. It also ended the quarter with 118 customers with at least $100,000 in ARR and annualized MRR, which is up from 622 in the year ago period.
Commenting on the results, CEO Dev Ittycheria said:
These would be strong results in any environment, but are particularly notable during the global health and economic crisis. I'm especially proud of how our employees across all facets of the business have adapted to working in a remote environment and execute at a high level. Their passion and commitment to our customers and to the business in this difficult time have been outstanding.
Since our inception 13 years ago, we put the developer at the center of our universe, and we introduced a new class of database based on the document model or JSON. JSON is a data format that's easy for developers to read and write and machines to parse. We have always believed that JSON is the best way to work with data.
Ittycheria put the strong results down to MongoDB's effective go-to-market organisation, which is split into four groups: the field sales force; the inside sales team; MongoDB's self-service channel; and its partner organisation.
He also added that the company has made changes to its sales incentives, removing the need for sales reps to require a commitment from buyers up front. Instead, Ittycheria anticipates that once buyers are on the platform they will grow from there and by taking away the minimum commitment requirement, friction has been removed.
During the results, MongoDB also highlighted a number of high profile customer wins, which include one of the world's largest telecommunications providers, Adair Group, Agero, Highspot, Symphony and "one of the world's largest cloud providers".
In recent weeks the company has also made a number of significant new hires, including newly appointed CTO Mark Porter, who has 30 years experience in the database industry and was most recently CTO of Core Technologies and Transport at Grab. In addition, Harsha Jalihal has joined as MongoDB's new Chief People Officer, having previously served as VP of HR at Unilever, and Rishi Dave is now the company's Chief Marketing Officer, where he was previously CMO at Dun and Bradstreet.
Michael Gordon, MongoDB's Chief Operating Officer and Chief Financial Officer, provided some market guidance on what should be expected over the coming months. He said:
The negative impact of COVID-19 on new business in Q2 was less than we had expected. As Dev explained, our various go-to-market teams had executed well in the first fully remote quarter since the pandemic started.
Second, in Q1, we noted that we observed a slowdown in the growth in spending from our existing Atlas customers, particularly in the self-serve channel. In mid Q2, as the economies around the world started the gradual process of reopening, we saw an improvement in the rate of growth of our existing Atlas customers. While the trend still remains below historic levels, the improvement we experienced in Q2 increases our confidence that the slower than historical growth is simply a macro phenomenon.
Gordon added that any impact on the business throughout the rest of the year will largely be guided by what's happening within the economy. He said:
In March, we expected COVID-19 to have a material impact only in the first half of the year. By June, we understood the impact would extend into the second half of fiscal 2021. At this point, we clearly believe that the impact of pandemic will extend at least through the end of this fiscal year.
Our strong Q2 results notwithstanding, we do expect to see an impact on new business in the second half of the year, while customer engagement continues to be high, we expect macro uncertainty to be a factor. Furthermore, our forecast assumes we're continuing experiencing slower than historic growth from our existing Atlas customers, consistent with our results in Q2.
COVID-19 driving change
So, whilst MongoDB is positive about its capabilities to sell effectively amongst the uncertainty, and despite the cautious guidance going forward, CEO Dev Ittycheria was keen to highlight that COVID-19 has forced buyers to rethink their digital capabilities and that this will be an opportunity for MongoDB. He explained:
There's no question that what COVID-19 has done is forced every customer no matter how traditional or critical legacy they were to be digital by default. So whether you're a traditional retailer, you have to quickly build out your e-commerce channel. If you're in a different type of business, you have to figure out a way to engage with your customers in a digital kind of format and approach.
And so that obviously plays to our strength. One, customers can innovate and build very, very quickly on MongoDB. They can also scale it very well compared to all the other legacy platforms. Two, Atlas becomes very attractive because we take care of all the management of the database and the underlying infrastructure. So that makes it very attractive for allowing the customer to really focus on what's important to them.
And then as I said, multi-cloud plays a big role, depending on what the customer is trying to do, what geo coverage they need, what existing relationships they have with a certain cloud provider, etc. They have ultimate choice in terms of what underlying cloud provider to use with Atlas. So all those three things play in our favor. And I think what COVID has done is really accelerated long-term trends. We're always very bullish about the future. But the long-term trends are clearly accelerating and we're trying to capitalize on it.
Given the fast changing and uncertain economic environment, it's understandable why MongoDB's stock price rose on these results. The company has a cogent offering that plays well to the change agenda we are seeing from buyers and its go-to-market operations are in a good place to take advantage of that.