Dev Ittycheria: Yes. Thanks, Brent. No, it’s been broad-based. The holiday slowdown that we anticipated and was more pronounced was also broad-based really across the board. And then, when we look at the recovery that we observed in February, that was also broad-based. And so I think we’re seeing pretty consistent trends across industries.
Brent Bracelin: Helpful color. And then one quick follow-up, on EA I know that still ratable recognition of the ASC 606, $427 million contribution from EA in fiscal 2023. What’s baked into the assumption around EA next year? Are you assuming that business potentially declines to get to the 15%, 16% growth, just any color around what’s baked in? I apologize, if I missed the color there. But any color on EA expectations built in the guide for this year would be helpful.
Michael Gordon: Yes, sure. As you know, we run the business on a channel basis but just given the ASC 606 dynamics at least try and provide a little bit of color for folks to understand things. So from a Q1 standpoint, we did say we expect EA to be down sequentially Q1 relative to Q4 and that’s really a function of the EA renewal base. As you think about meeting the EA renewal basis lower in Q1? And then secondly, if you think about over the course of the full year, EA really is what drove a lot of the outperformance that we’ve seen this past year in fiscal 2023. And so what that means is that, sets up fairly tough compares for the balance of the year across EA. So I think that’s just sort of important to keep in mind, as you think through the modeling and the forecast and that’s tried why we provide all that color.
Brent Bracelin: So year-over-year decline is not out of the question then?
Michael Gordon: We said in Q1, we expect a sequential decline, yes. Long term just in case, it isn’t clear long-term EA continues to be a growth opportunity. While we talk a lot about public cloud and public cloud adoption in these contexts in these settings, there’s still a large number of companies, and a large number of applications that people have not yet moved to the cloud and EA continues to find very strong product market fit with those customers. And as we’ve mentioned before is increasingly seen as an on-ramp to the public cloud. And so I think, it’s an important kind of aspect of the MongoDB run anywhere strategy.
Operator: Thank you. Our next question comes from Michael Turits with KeyBanc. You may proceed.
Michael Turits: Hi, guys. Two questions. One; what’s happening, the contracts that were renewed this quarter. What’s happening in the level of commits for next year? And then secondly, on margins obviously, your EBIT margins for the full year, the guide is for some expansion but not a lot. And I understand that, you have a delayed impact to the cost of hiring last year, but why not more expansion of those margins? Was it that you just waited too long to start slowing with that headcount growth in December or why are we not able to find more ways to get more margin expansion this year? So commits and margin expansion.
Dev Ittycheria: Great. Thanks. On the commits, we continue to have very high renewal rates. We’ve not seen any uptick in churn despite sort of the macro environment, which again I think underscores the mission criticality. And as it relates to commitments as I’ve mentioned for the last several years, last probably at least three years now, we’ve been deemphasizing commitments. And so that tends not to be the way that, customers think. And the scenario that you’re describing, I can give you kind of like an anecdotal insight or perspective. If you think about someone who is sort of under consumed relative to their initial commitment, oftentimes that can be a result of the product that got started late, right? So they were more optimistic about how quickly they could launch their own internal application.
They lost a few months, but the application is taken off and performed nicely. And so you can easily see scenarios, where they’re renewing at similar or higher levels. So I wouldn’t overly read into that unused commitment dynamic. We really are just exposing that to folks so people can understand the sequential guide. On profitability and on margins, maybe I’ll say a couple of things. We feel very good about the performance overall. We feel good about the guide. The guide has another 100 basis points of improvement relative to fiscal 2023, once you exclude the one-time credits that we called out, we were able to €“ we’re pleased we were able to maintain that 100 basis point improvement even after Q4 and all of fiscal 2023 came in stronger than we had expected.
And so I think that’s sort of important to keep in mind as well. And then the last thing, I’d say is a little bit to Dev’s answer to Raimo’s question, we are continuing to invest for the long term. And so this is not an attempt to cut all costs or seize all investment in the future. We believe that we’re in the early innings of capitalizing on a large market opportunity. We know the cost of capital is higher. Therefore, fewer things clear the bar. We’re being really judicious about making sure that we’re focusing on the areas of highest return and highest priority so that we can set ourselves up well to capitalize on this long-term opportunity.
Michael Turits: Thanks, Mike.
Operator: Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.
Tyler Radke: Yes. Thanks for taking my question. I wanted to ask you just about the strength in the direct customer adds, the direct sales add which was — remained strong versus last quarter. I’m wondering if there’s — just the trends you’re seeing in terms of the segment for your customers — are you seeing strength more pronounced on the enterprise side or, kind of, mid-market. If you could just kind of comment on the differing trends you’re seeing in SMB versus enterprise. That would be great. Thanks.
Dev Ittycheria: Yes. So thanks for the question, Tyler. In terms of new business strength we’re actually seeing it generally across the board. Our direct sales customers — both North America, Europe and the large enterprise and SMB space have been have been quite good. That’s also a function of the focus on acquiring new customers because once you get into an account that a customer will pay handsome dividends for us over the long-term. But as part of that also we’re really trying to grow our existing installed base by adding new workloads from those existing customers and that’s a big part of our strategy as well. And while we have less control over how those workloads grow we know we can directly control how quickly we add new customers and new workloads and that’s why we’re really focused on the latter.
Tyler Radke: Great. And you talked about some more instances of standardization deals in the quarter where presumably customers are spending millions of dollars on Mongo. I’m just curious in this environment are those — are you seeing more or less of those? Obviously, it’s a challenging environment to get larger deals done. But maybe just talk about how you’re how you’re approaching those? And any commonality just to the extent you’ve seen an uptick there. Thank you.
Dev Ittycheria: Yes. So what I’ve said in the past still remains true. Once we’re in an account does not mean that we’ve become a standard. And so the job then of the accounting depending on the size of the account is to then ultimately get that organization to declare us either a de facto standard just by how popular we’ve become and the preference developers have or that sometimes some organizations have a very formal process to certify a new technology inside their enterprise. In either case when that happens it essentially means developers don’t need to seek permission to use MongoDB that they can use MongoDB for pretty much any use case. And that does tend to unlock a wide array of new use cases for us. So for example in our strategic accounts where we’ve deployed more resources those are accounts that either we become the standard or very close to become the standard.
And as we’ve talked about in the past when we become the standard the volume of new workloads that come to MongoDB just increased meaningfully, which obviously drives also more revenue for us. And so that’s — that’s essentially our strategy. In terms of what’s happening recently. I would say there’s no change in pace in terms of the number of customers declaring as a standard. What I was trying to just explain was that these very, very large customers, when they’re declaring the standard just given the scale and complexity of their business, they can’t change standards for a very long time. It just doesn’t operationally make sense. So when they make a decision to move to a new platform that to some degree is almost like a decade long perspective on the fact that they expect MongoDB to be their standard for the next decade plus.
And that’s €“ and so consequently the way they evaluate us in terms of our ability to address their requirements today and what they think their requirements will be in the future.
Tyler Radke: Great. Thank you.
Dev Ittycheria: Thank you.
Operator: Thank you. Our next question comes from Ittai Kidron with Oppenheimer. You may proceed.
Ittai Kidron: Thanks. First of all for an easy one. Have you made any changes to the comp plan as you enter the new fiscal year?
Dev Ittycheria: We always make small modifications of the comp plan. This year for the sales force we are really focused on new workload acquisition and we’re more focused on acquiring and getting those workloads to consume and less focus as Michael mentioned, on driving big commitments. Given how sticky MongoDB workloads tend to be. We know once a customer deploys an app on MongoDB. They tend to stick around for a long time. And so it’s all about making it very, very easy for customers to deploy on MongoDB. And then obviously over time, customers will come to us, when they feel like it makes sense for them to negotiate for a better discount based on a volume commitment to us. But our real focus is just getting our sales force to acquire new workloads as fast as possible.
Ittai Kidron: I guess, if that’s the case if you talked about in your prepared remarks about trying to separate yourself on the pack and taking advantage of opportunities in markets like this. And clearly you had experience and history in this area. While I understand they need to be very focused in scrutinized expenses. Why not be a bit more aggressive actually go the other way and actually double down on your investment and go after those beachheads that long-term will drive really a good strong market positioning for you.
Dev Ittycheria: Yes. I think Michael and I and the rest of the leadership team we tend to be a group of people who have seen different environments. And I think we’re trying to take a balanced approach I think we’re not some people who put their heads and sand and recognize and don’t recognize that there’s a change in the macro environment and change in the cost of capital. So we want to make sure that we’re growing but growing profitably, growing efficiently. And so we’re constantly assessing what channels are working or what teams and different channels are working, what adjustments do we need to make. And as you’ve seen, we’ve been €“ we’ve not been shy about constantly evolving our business and as well as how we go to market.
And so transitioning the business from a predominantly on-prem subscription business to now predominantly consumption business has required us to make lots of changes over time. And so where we take a balanced view of balancing both short-term and long-term, an earlier question you got was why not be more profitable. Now you’re asking us why aren’t you investing more. So that’s a classic example of retention that we have to deal with.
Ittai Kidron: Very good. Good luck.
