Couchbase Announces Second Quarter Fiscal 2023 Financial Results

SANTA CLARA, Calif., Sept. 7, 2022 /PRNewswire/ -- Couchbase, Inc. (NASDAQ: BASE), provider of a leading modern database for enterprise applications, today announced financial results for its second quarter ended July 31, 2022.

"I'm pleased to report that we delivered results above the high end of guidance, including another quarter of 30% constant currency ARR growth," said Matt Cain, President and CEO of Couchbase. "Our differentiated database-as-a-service Capella continues to build momentum as evidenced by enthusiastic customer receptivity and growing transaction volume. Despite a more challenging macroeconomic environment, we remain confident that our modern database is well positioned to enable our customers to fulfill their digital transformation objectives."

Second Quarter Fiscal 2023 Financial Highlights

• Revenue: Total revenue for the quarter was $39.8 million, an increase of 34% year-over-year. Subscription revenue for the quarter was $37.1 million, an increase of 32% year-over-year.
• Annual recurring revenue (ARR): Total ARR as of July 31, 2022 was $145.2 million, an increase of 26% year-over-year, or 30% on a constant currency basis. See the section titled "Key Business Metrics" below for details.
• Gross margin: Gross margin for the quarter was 88.0%, compared to 88.1% for the second quarter of fiscal 2022. Non-GAAP gross margin for the quarter was 88.7%, compared to 88.3% for the second 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 $15.2 million, compared to $14.0 million for the second quarter of fiscal 2022. Non-GAAP operating loss for the quarter was $8.4 million, compared to $12.0 million for the second quarter of fiscal 2022.
• Cash flow: Cash flow used in operating activities for the quarter was $7.7 million, compared to $16.0 million in the second quarter of fiscal 2022. Capital expenditures were $1.7 million during the quarter, leading to negative free cash flow of $9.3 million, compared to negative free cash flow of $16.0 million in the second quarter of fiscal 2022.
• Remaining performance obligations (RPO): RPO as of July 31, 2022 was $166.5 million, an increase of 40% year-over-year.

Recent Business Highlights

• In a sponsored benchmark program with global IT service provider Altoros, Capella significantly outperformed competing database-as-a-service offerings across various workloads and cluster sizes. The performance testing leveraged the Yahoo! Cloud Serving Benchmark standard for NoSQL database benchmarking.
• Announced the general availability of Capella App Services, a fully managed application backend, on Google Cloud. By expanding multi-cloud support for our fully managed offline-first data sync offering, customers can easily move Capella App Services between public clouds.
• Granted a third U.S. patent, this time for innovative use of inverted search indexes for querying array fields in JSON. The patent explains how to build indexes with an unlimited number of array keys and query them efficiently using SQL++, Couchbase's query language. Prior to this innovation, databases could only index a single array key per index, which limited the query performance.
• Introduced the Couchbase Ambassador Program, designed to support and empower Couchbase's community of users and contributors who are passionate about and experts in Couchbase technology to share their knowledge with a broader developer audience.
• Launched the Couchbase Community Hub to better connect users and contributors as well as foster increased sharing, learning and discovery. The Community Hub is a new space for the Couchbase developer community that complements the existing Couchbase Discord server and Couchbase Community Forums.
• Recognized as one of the Best Workplaces in the Bay Area in 2022 by Great Place to Work and Fortune Magazine.

Financial Outlook

For the third quarter and full year of fiscal 2023, Couchbase expects:

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 third 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 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Wednesday, September 7, 2022, to discuss its financial results and business highlights. 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

At Couchbase, we believe data is at the heart of the enterprise. We empower developers and architects to build, deploy and run their most mission-critical applications. Couchbase delivers a high-performance, flexible and scalable modern database that runs across the data center and any cloud. Many of the world's largest enterprises rely on Couchbase to power the core applications their businesses depend on. For more information, visit www.couchbase.com.

Couchbase has used, and intends to continue using, its investor relations website and the corporate blog at blog.couchbase.com 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 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 intended to be a replacement for forecasts of revenue. Although we seek to increase ARR as part of our strategy of targeting large enterprise customers, this metric may fluctuate from period to period based on our ability to acquire new customers and expand within our existing customers. We believe that our ARR is an important indicator of the growth and performance of our business. We updated our definition of ARR beginning in the first quarter of fiscal 2023 to include revenue from consumption-based cloud credits of Couchbase Capella products by annualizing the prior 90 days of actual consumption, assuming no increases or reductions in usage. The reason for this change is to better reflect the ARR for Couchbase Capella products following the launch of Couchbase Capella in fiscal 2022. ARR for periods prior to the first quarter of fiscal 2023 has not been adjusted to reflect this change as it is not material to any period previously presented.

We also attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates within the current period. We calculate constant currency growth rates by applying the applicable prior period exchange rates to current period results.

Forward-Looking Statements

This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, quotations of management, the section titled "Financial Outlook" above and statements about Couchbase's market position, strategies and potential market opportunities. Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as "anticipate," "expect," "intend," "plan," "believe," "continue," "could," "potential," "remain," "may," "might," "will," "would" or similar expressions and the negatives of those terms. However, not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors, including factors beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to: our history of net losses and ability to achieve or maintain profitability in the future; our ability to continue to grow on pace with historical rates; our ability to manage our growth effectively; intense competition and our ability to compete effectively; cost-effectively acquiring new customers or obtaining renewals, upgrades or expansions from our existing customers; the market for our products and services being relatively new and evolving, and our future success depending on the growth and expansion of this market; our ability to innovate in response to changing customer needs, new technologies or other market requirements; our limited operating history, which makes it difficult to predict our future results of operations; the significant fluctuation of our future results of operations and ability to meet the expectations of analysts or investors; our significant reliance on revenue from subscriptions, which may decline and, the recognition of a significant portion of revenue from subscriptions over the term of the relevant subscription period, which means downturns or upturns in sales are not immediately reflected in full in our results of operations; and the impact of geopolitical and macroeconomic factors and the ongoing COVID-19 pandemic. Further information on risks that could cause actual results to differ materially from forecasted results are included in our filings with the Securities and Exchange Commission that we may file from time to time, including those more fully described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2022 that will be filed with the Securities and Exchange Commission, which should be read in conjunction with this press release and the financial results included herein. Any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

The following table presents a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated (in thousands, unaudited):

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SOURCE Couchbase, Inc.