Santa Clara, Calif., – December 6, 2022 – Couchbase, Inc. (NASDAQ: BASE), the cloud database platform company, today announced financial results for its third quarter ended October 31, 2022.
“We are proud to have delivered third quarter results ahead of all guidance metrics,” said Matt Cain, Chairperson and CEO of Couchbase. “We saw robust bookings growth, meaningful new Capella logo additions and a rapidly growing pipeline of exciting opportunities across both new and existing customers, and all of this despite a more challenging macroeconomic environment. The investments we have made in our cloud database platform are paying off and I’m thrilled that Capella in particular is becoming an increasingly important contributor to our business.”
Third Quarter Fiscal 2023 Financial Highlights
- Revenue: Total revenue for the quarter was $38.6 million, an increase of 25% year-over-year. Subscription revenue for the quarter was $35.7 million, an increase of 23% year-over-year.
- Annual recurring revenue (ARR): Total ARR as of October 31, 2022 was $151.7 million, an increase of 24% year-over-year, or 28% on a constant currency basis. See the section titled “Key Business Metrics” below for details.
- Gross margin: Gross margin for the quarter was 87.4%, compared to 87.9% for the third quarter of fiscal 2022. Non-GAAP gross margin for the quarter was 88.0%, compared to 88.3% for the third quarter of fiscal 2022. See the section titled “Use of Non-GAAP Financial Measures” and the tables titled “Reconciliation of GAAP to Non-GAAP Results” below for details.
- Loss from operations: Loss from operations for the quarter was $16.6 million, compared to $15.5 million for the third quarter of fiscal 2022. Non-GAAP operating loss for the quarter was $9.6 million, compared to $12.1 million for the third quarter of fiscal 2022.
- Cash flow: Cash flow used in operating activities for the quarter was $14.7 million, compared to $19.7 million in the third quarter of fiscal 2022. Capital expenditures were $1.6 million during the quarter, leading to negative free cash flow of $16.3 million, compared to negative free cash flow of $20.3 million in the third quarter of fiscal 2022.
- Remaining performance obligations (RPO): RPO as of October 31, 2022 was $159.6 million, an increase of 28% year-over-year.
Recent Business Highlights
- Announced a newly-designed user experience for Couchbase Capella, inspired by popular technologies that millions of developers already use to build modern applications. Because of this sense of familiarity, the new Capella experience boosts productivity so developers can more easily build next-generation applications.
- Announced Capella has a new high-data density storage engine with compute and storage advantages that dramatically drops the total cost of ownership compared to other DBaaS offerings. This innovation means customers can optimize towards smaller, more-affordable clusters that hold and process more data with higher processing throughput power, delivering best-in-class price performance.
- Announced enhanced security and single sign-on capabilities in Capella including successfully completing a SOC 2, Type II audit and delivering support for HIPAA-compliant applications.
- Announced a multi-year strategic collaboration agreement with Amazon Web Services, Inc. (AWS). Under this agreement, Couchbase and AWS have committed to offer customers integrated go-to-market activities, commercial incentives and technology integrations. This includes migrating workloads to Capella on AWS as well as extending Capella App Services to run on AWS edge services.
- Named a Strong Performer in The Forrester WaveTM: Translytical Data Platforms, Q4 2022.
Financial Outlook
For the fourth quarter and full year of fiscal 2023, Couchbase expects:
| Q4 FY2023 Outlook | FY2023 Outlook | |
|---|---|---|
| Total Revenue | $38.2-38.4 million | $151.4-151.6 million |
| Total ARR | $160.5-162.5 million | $160.5-162.5 million |
| Non-GAAP Operating Loss | $15.0-14.8 million | $46.4-46.2 million |
The guidance provided above is based on several assumptions that are subject to change and many of which are outside our control. If actual results vary from these assumptions, our expectations may change. There can be no assurance that we will achieve these results.
Couchbase is not able, at this time, to provide GAAP targets for operating loss for the fourth quarter or full year of fiscal 2023 because of the difficulty of estimating certain items excluded from non-GAAP operating loss that cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.
Conference Call Information
Couchbase will host a live webcast at 5:30 a.m. Pacific Time (8:30 a.m. Eastern Time) on Tuesday, December 6, 2022, to discuss its financial results and business highlights. The conference call can be accessed by dialing 877-407-8029 from the United States, or +1 201-689-8029 from international locations. The live webcast and a webcast replay can be accessed from the investor relations page of Couchbase’s website at investors.couchbase.com.
About Couchbase
Modern customer experiences need a flexible database platform that can power applications spanning from cloud to edge and everything in between. Couchbase’s mission is to simplify how developers and architects develop, deploy and consume modern applications wherever they are. We have reimagined the database with our fast, flexible and affordable cloud database platform Capella, allowing organizations to quickly build applications that deliver premium experiences to their customers – all with best-in-class price performance. More than 30% of the Fortune 100 trust Couchbase to power their modern applications. For more information, visit www.couchbase.com and follow us on Twitter @couchbase.
Couchbase has used, and intends to continue using, its investor relations website and the corporate blog at www.couchbase.com/blog/ to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the corporate blog in addition to following our press releases, SEC filings and public conference calls and webcasts.
Use of Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, we believe certain non-GAAP financial measures are useful to investors in evaluating our operating performance. We use certain non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, may be helpful to investors because they provide consistency and comparability with past financial performance and meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. Non-GAAP financial measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP financial measures used by other companies. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures (provided in the financial statement tables included in this press release), and not to rely on any single financial measure to evaluate our business.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders and non-GAAP net loss per share attributable to common stockholders: We define these non-GAAP financial measures as their respective GAAP measures, excluding expenses related to stock-based compensation expense and employer taxes on employee stock transactions. We use these non-GAAP financial measures in conjunction with GAAP measures to assess our performance, including in the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.
Beginning with the first quarter of fiscal 2023, we have excluded employer payroll taxes on employee stock transactions, which is a cash expense, from our non-GAAP results. These payroll taxes have been excluded from our non-GAAP results because they are tied to the timing and size of the exercise or vesting of the underlying equity awards, and the price of our common stock at the time of vesting or exercise may vary from period to period independent of the operating performance of our business. Prior period non-GAAP financial measures have not been adjusted to reflect this change, and the effect of this change is not material for any period previously presented.
Free cash flow: We define free cash flow as cash used in operating activities less additions of property and equipment, which includes capitalized internal-use software costs. We believe free cash flow is a useful indicator of liquidity that provides our management, board of directors and investors with information about our future ability to generate or use cash to enhance the strength of our balance sheet and further invest in our business and pursue potential strategic initiatives.
Please see the reconciliation tables at the end of this press release for the reconciliation of GAAP and non-GAAP results.
Key Business Metrics
We review a number of operating and financial metrics, including ARR, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
We define ARR as of a given date as the annualized recurring revenue that we would contractually receive from our customers in the month ending 12 months following such date. Based on historical experience with customers, we assume all contracts will be automatically renewed at the same levels unless we receive notification of non-renewal and are no longer in negotiations prior to the measurement date. ARR also includes revenue from consumption-based cloud credits of Couchbase Capella products. ARR for Couchbase Capella products in a customer’s initial year is calculated as described above; after a customer’s initial year it is calculated by annualizing the prior 90 days of actual consumption, assuming no increases or reductions in usage. ARR excludes revenue derived from the use of cloud products only based on on-demand arrangements and services revenue. ARR should be viewed independently of revenue, and does not represent our revenue under GAAP on an annualized basis, as it is an operating metric that can be impacted by contract start and end dates and renewal dates. ARR is not inten