Financial Data and Key Metrics Changes - Revenue in Q1 was $34.9 million, an increase of 25% year-over-year [7][27] - Total annual recurring revenue (ARR) was $139.7 million, representing 27% year-over-year growth [7][27] - Net new ARR was a record for Q1, and remaining performance obligations (RPO) grew 68% to $169 million [7][27] - Gross margin remained best in class at 87.3% [7][29] - Operating profit was negative $13.4 million, ahead of guidance [7][31] Business Line Data and Key Metrics Changes - Subscription revenue for Q1 was $32 million, an increase of 21% year-over-year [28] - Professional services revenue for Q1 was $2.9 million, an increase of 93% year-over-year [28] - ARR per customer performance in Q1 was $227,000, up from $225,000 in the previous quarter [28] Market Data and Key Metrics Changes - The company saw a 100% year-over-year increase in partner-sourced and influenced new business [16] - The company exited the quarter with 614 customers, an increase of 24 customers from the fourth quarter [28] Company Strategy and Development Direction - The company aims to drive a generational rethink in the $60 billion database market [9] - Significant investments are being made in Capella, with plans to extend its availability to new regions and cloud service providers [11][12] - The company is transitioning to a cloud-centric model, with a focus on Capella as a service [13][14] - The introduction of version 7.1 of Couchbase Server aims to enhance performance and reduce deployment costs [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects despite increased macroeconomic volatility [20] - Digital transformation initiatives are receiving high levels of attention, with enterprises planning to increase investment by 46% over the next 12 months [22] - The company is well-positioned to participate in the growing cloud database management service market [21] Other Important Information - Huw Owen has been promoted to Chief Revenue Officer, expected to drive growth [24] - The company is focused on balancing growth and profitability, with an emphasis on becoming a cloud-first company [35] Q&A Session Summary Question: Competitive environment and Capella's features - Management highlighted that Capella's new features and cloud support significantly enhance their competitive position, leading to increased demand and customer interest [37][39] Question: Go-to-market model and new CRO's focus - The new CRO is expected to improve new customer acquisition and leverage Capella for growth, with a focus on scaling the organization [40][42] Question: Market resonance and use cases for Capella - Management noted that Capella's architecture allows for a wide range of applications, enabling the company to address both mission-critical and emerging market needs [46][49] Question: COVID-impacted verticals and return to normalcy - The company reported a healthy return to pre-COVID levels, contributing to growth acceleration [55] Question: SQL-like architecture as a competitive advantage - Management affirmed that their SQL-like architecture is a key differentiator, facilitating integration with data warehouses and BI tools [56][57] Question: Capella's role in ARR results - Capella played a significant role in the strong ARR results, with customers increasingly considering long-term investments in the platform [62] Question: Referenceable customers and deployment at scale - Management indicated that they have significant customers using Capella at scale, with plans to share success stories as they become available [71] Question: Guidance and macroeconomic impact - Management expressed confidence in their guidance while remaining cautious about macroeconomic uncertainties [74] Question: Hiring plans for the year - The company is adapting its hiring plan as necessary, focusing on dedicated resources for Capella and maintaining operational flexibility [76][78]

Part I [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions investors that the Annual Report contains forward-looking statements subject to substantial risks and uncertainties, with actual results potentially differing materially - Forward-looking statements cover future **financial performance** (**revenue**, **costs**, **profitability**), **demand** for **products**/services, ability to attract/retain **customers** and partners, new **product** development (Couchbase Capella), competitive landscape, impact of COVID-19, regulatory compliance, **intellectual property**, and **expenses** as a public company[10](index=10&type=chunk) - Investors are cautioned against relying on forward-looking statements as predictions, as actual **results** may differ materially due to **risks** and uncertainties, including those detailed in the 'Risk Factors' section[10](index=10&type=chunk)[12](index=12&type=chunk) [Risk Factor Summary](index=5&type=section&id=Risk%20Factor%20Summary) This section summarizes principal risks including **net losses**, intense competition, **customer** acquisition challenges, market evolution, innovation needs, and operational, **intellectual property**, and regulatory **risks** - The company has a history of **net losses** and may not achieve or maintain **profitability**, with **revenue growth** potentially not keeping pace with historical **rates**[13](index=13&type=chunk) - Intense competition, challenges in **cost-effectively** acquiring new **customers** or securing renewals/expansions from existing ones, and the evolving market for **products** and services pose significant **risks**[13](index=13&type=chunk) - **Risks** include failure to innovate, limited operating history making future **results** difficult to predict, significant fluctuations in future **results**, and the impact of the global COVID-19 pandemic and economic downturns[13](index=13&type=chunk) - Operational **risks** involve real or perceived errors in **products**, interruptions in technology, inability to provide high-quality **customer support**, and reliance on internal, unverified operational **metrics**[13](index=13&type=chunk) - **Intellectual property risks** include challenges in monetizing and protecting **IP** due to open source licensing, potential litigation, and the ease with which competitors can enter the market[14](index=14&type=chunk) - **Security breaches**, non-compliance with **data protection** and **privacy laws**, and the complexities of selling to heavily regulated organizations are significant legal and regulatory **risks**[14](index=14&type=chunk) [Business Overview](index=6&type=section&id=Item%201.%20Business) Couchbase offers a modern, versatile database platform for mission-critical enterprise applications, combining relational and NoSQL strengths across diverse deployment environments - Couchbase offers a modern database for enterprise applications, emphasizing high **performance**, reliability, scalability, and agility for mission-critical operations[16](index=16&type=chunk) - The database is versatile, supporting cloud, multi-cloud, hybrid-cloud, on-premise, and edge environments, fusing relational database strengths with NoSQL flexibility[16](index=16&type=chunk) - Couchbase Capella is a fully-managed Database-as-a-Service (DBaaS) offering, simplifying database management and supporting a broad set of use cases[16](index=16&type=chunk) [Overview](index=7&type=section&id=Overview) Couchbase provides a leading modern database for mission-critical enterprise applications, combining relational and NoSQL strengths across diverse deployment environments to facilitate digital transformation - Couchbase's mission is to empower enterprises with a modern database for mission-critical applications, ensuring high **performance**, reliability, scalability, and agility[16](index=16&type=chunk) - The database architecture fuses relational database strengths (SQL transactions, ACID guarantees) with NoSQL flexibility and scalability, supporting cloud, multi-cloud, hybrid-cloud, on-premise, and edge deployments[16](index=16&type=chunk) - Couchbase Capella, their fully-managed DBaaS, simplifies database management and reduces the need for additional databases, facilitating a seamless transition from legacy systems[16](index=16&type=chunk) [Our Solution](index=7&type=section&id=Our%20Solution) Couchbase's modern database is purpose-built for high **performance** at scale in mission-critical enterprise applications, addressing digital transformation and emerging technology demands - Couchbase's modern database is purpose-built for high **performance** at scale, serving mission-critical enterprise applications[17](index=17&type=chunk) - The platform is designed to address the increasing **demands** of digital transformation and emerging trends such as self-driving cars, 5G edge computing, augmented reality, and blockchain[17](index=17&type=chunk) [Key Customer Benefits](index=8&type=section&id=Key%20Customer%20Benefits) Couchbase offers a fast, flexible, familiar, and future-proof database solution, enabling efficient and agile mission-critical applications across various deployment models - **Fast**: Achieves tens of **millions** of operations per second and sub-millisecond response times, with elasticity and automatic **data replication** for reliability[19](index=19&type=chunk) - **Flexible**: Supports agile development and CI/CD with a flexible JSON **data model**, allowing schema changes without downtime[19](index=19&type=chunk) - **Familiar**: Utilizes SQL++ query language, extending SQL for JSON, to minimize disruption for SQL-trained DBAs[19](index=19&type=chunk) - **Future Proof**: Designed for multi-cloud to edge deployment, offering Couchbase Capella as a fully-managed DBaaS for simplified operations[19](index=19&type=chunk) [Our Competitive Strengths](index=8&type=section&id=Our%20Competitive%20Strengths) Couchbase's competitive strengths include a powerful, future-proof architecture, effective 'land and expand' and dual go-to-market strategies, and a strong company culture - The platform is powerful for both enterprise architects and application developers, offering high availability, **performance** at scale, and agile development[20](index=20&type=chunk) - The 'land and expand' model allows easy initial deployment and subsequent expansion to mission-critical applications, making Couchbase a core system of record[20](index=20&type=chunk) - A 'flywheel' go-to-market motion combines a 'sell-to' strategy for enterprise architects with a 'buy-from' motion for application developers, enhancing market reach and **sales efficiency**[20](index=20&type=chunk) - The platform is architected for today and tomorrow, solving major computer science problems to provide high **performance**, reliability, scalability, and agility[20](index=20&type=chunk) - A strong company culture, emphasizing 'Be Valued, Create Value,' is considered a key asset for attracting and retaining top talent[20](index=20&type=chunk) [Our Growth Strategy](index=9&type=section&id=Our%20Growth%20Strategy) Couchbase's **growth strategy** focuses on innovation, expanding its **customer base** through direct and developer-led adoption, and investing in its partner and developer ecosystem - Focus on sustained differentiation and innovation for enterprise applications, with Couchbase Capella enabling easy management and consumption of the core platform[22](index=22&type=chunk) - Investments in Couchbase Capella include extending availability to additional cloud service providers and improving the developer experience[22](index=22&type=chunk) - Enhance the core platform (Couchbase Server, Couchbase Mobile) to provide agility, flexibility, and **performance**, eliminating the need for multiple point solutions[22](index=22&type=chunk) - Expand within the existing **customer base** by moving from initial application deployments to mission-critical systems of record[22](index=22&type=chunk) - Grow the **customer base** with new enterprises through a direct 'sell-to' motion targeting architects and a 'buy-from' motion targeting application developers[22](index=22&type=chunk) - Invest in growing the ecosystem of ISVs, cloud service providers, systems integrators, and the developer community to increase reach and mindshare[22](index=22&type=chunk) [Our Products](index=9&type=section&id=Our%20Products) Couchbase provides a modern database platform with key **products** including Couchbase Capella (DBaaS), Couchbase Server (NoSQL with SQL++), and Couchbase Mobile for diverse enterprise and edge needs - Couchbase Capella is a fully-managed, automated, and secure DBaaS that simplifies database management across cloud environments, offering SQL familiarity, developer agility, and industry-leading **price-performance**[24](index=24&type=chunk) - Couchbase Server is a full-featured, multi-service NoSQL database that combines relational database aspects (distributed ACID transactions) with modern database flexibility, including a comprehensive SQL-compatible query language (SQL++)[25](index=25&type=chunk) - Couchbase Mobile provides an embedded NoSQL database for mobile and edge devices, ensuring an always-on experience with high **data availability** even without internet connectivity, and includes a synchronization gateway[27](index=27&type=chunk) [Our Technology](index=10&type=section&id=Our%20Technology) Couchbase's technology features a memory-first, elastically scalable architecture with ACID transactions, distributed replication, and a unified platform integrating multiple services for mission-critical applications - Couchbase's core architecture is memory-first, leveraging fast memory and network for sub-millisecond latency and high availability, eliminating the need for a secondary in-memory **product**[30](index=30&type=chunk) - It supports elastic scalability through a shared-nothing distributed database, automatically redistributing **data** and replicas, and offering multi-dimensional scaling (MDS) for optimized resource use[33](index=33&type=chunk)[34](index=34&type=chunk) - The platform provides ACID transactions, distributed replication (including XDCR for disaster recovery), and a single unified platform integrating key-value, SQL++ query, indexing, full-text search, eventing, and analytics services[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Technology enables developer agility, uniform programming models via SDKs, integration with big **data** ecosystems (Spark, Kafka, Elasticsearch), and cloud-native deployments with Kubernetes for autonomous database management and full-stack **security**[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) [Our Customers](index=13&type=section&id=Our%20Customers) As of January 31, 2022, Couchbase served **590** global **customers**, including cloud-native organizations, SMEs, and Fortune 100 companies across various industries - As of January 31, 2022, Couchbase had **590 customers** worldwide[51](index=51&type=chunk) - **Customers** range from cloud-native organizations to those undergoing digital transformation, including small and medium-sized enterprises and Fortune 100 companies[51](index=51&type=chunk) [Marketing, Sales and Partners](index=13&type=section&id=Marketing%2C%20Sales%20and%20Partners) Couchbase utilizes a dual go-to-market strategy, combining enterprise 'sell-to' and developer-led 'buy-from' motions, supported by a segmented **sales force**, 'land-and-expand' model, and a robust partner ecosystem - Couchbase uses a dual go-to-market strategy: an enterprise 'sell-to' motion for strategic **demands** and a developer-led 'buy-from' motion for adoption, including free trials and Community Editions[53](index=53&type=chunk) - Marketing efforts build brand reputation and generate **demand** among enterprise architects and application developers through awareness campaigns, digital **demand generation**, and community engagement[54](index=54&type=chunk) - Direct **sales force** is segmented by account size, geography, and industry, supported by **sales engineers** and a **customer success team** driving a 'land-and-expand' model[55](index=55&type=chunk)[56](index=56&type=chunk) - The PartnerEngage program fosters relationships with Cloud Service Providers, Independent Software Vendors, Systems Integrators, and Technology Partners to expand market reach and distribution[59](index=59&type=chunk)[60](index=60&type=chunk) [Human Capital Resources](index=14&type=section&id=Human%20Capital%20Resources) Couchbase's culture, built on 'Be Valued' and 'Create Value,' supports its **646 employees** across **25 countries**, fostering good employee relations and a strong workforce - Couchbase's culture is built on 'Be Valued' (Be a Good Human, Act with Uncompromising Integrity, Serve Your Family) and 'Create Value' (Attack Hard Problems, Play to Win, Make Tomorrow Better than Today)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - As of January 31, 2022, the company had **646 employees** across **25 countries**, with **280** in **sales** and marketing, **247** in **research and development**[66](index=66&type=chunk) - The company considers its relations with **employees** to be good and has not experienced any work stoppages[67](index=67&type=chunk) [Research and Development](index=15&type=section&id=Research%20and%20Development) Couchbase's **R&D organization**, with globally distributed small functional teams, drives platform and **product** innovation, design, and quality for agility and efficiency - The **R&D organization** is responsible for the research, design, architecture, development, testing, and quality of the platform and existing **products**[68](index=68&type=chunk) - Software development uses iterative releases with small functional teams for agility and **efficiency**[68](index=68&type=chunk) - **R&D personnel** are primarily located in the United States, the United Kingdom, and India, with a globally distributed workforce considered a strategic advantage[68](index=68&type=chunk) [Intellectual Property](index=15&type=section&id=Intellectual%20Property) Couchbase protects its **intellectual property** via patents, copyrights, trademarks, and trade secrets, while also managing **risks** associated with its use of and contributions to open source software - Couchbase protects its **intellectual property** through **patent applications**, copyrights, trademarks, **trade secrets**, and contractual agreements[69](index=69&type=chunk) - As of January 31, 2022, the company owned **one issued U.S. patent**, **five pending U.S. patent applications**, **four pending PCT applications**, **five registered U.S. trademarks**, and **19 registered non-U.S. trademarks**[69](index=69&type=chunk) - The company uses third-party open source software in its **products** and contributes to open source projects, which presents **risks** related to **intellectual property**[70](index=70&type=chunk) [Compliance with Government Regulation](index=15&type=section&id=Compliance%20with%20Government%20Regulation) This section directs readers to the 'Risk Factors' for detailed information on governmental regulations and associated business **risks** [Competition](index=15&type=section&id=Competition) Couchbase competes in a rapidly evolving market against legacy, NoSQL, and cloud providers, emphasizing platform functionality, deployment ease, and multi-environment flexibility, while acknowledging competitive **risks** - The market is competitive with rapid technological changes, evolving **customer requirements**, and frequent new **product** introductions[72](index=72&type=chunk) - Primary competitors include legacy database providers (Oracle, IBM, Microsoft), NoSQL providers (MongoDB), and cloud infrastructure providers (Amazon, Microsoft, Google)[73](index=73&type=chunk) - Key competitive factors include platform functionality (agility, flexibility, **performance** at scale), ease of deployment, multi-cloud/hybrid/mobile environment support, **data handling**, solution bundling, enterprise-class **security**/reliability, consumption models, **price**/TCO, **sales**/marketing, and brand reputation[73](index=73&type=chunk) - Couchbase believes it competes favorably but faces significant **risks** from increasing competition[74](index=74&type=chunk) [Corporate Information](index=16&type=section&id=Corporate%20Information) Couchbase, Inc., incorporated in Delaware in 2008, established its current name in 2011 after mergers, with principal executive offices in Santa Clara, California - Couchbase, Inc. was incorporated in Delaware in **2008** as NorthScale, Inc., changing its name to Membase, Inc. in **2010**, and then to Couchbase, Inc. in **2011** after merging with CouchOne, Inc[75](index=75&type=chunk) - The principal executive offices are located at 3250 Olcott Street, Santa Clara, California 95054[75](index=75&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) Couchbase files SEC reports (10-K, 10-Q, 8-K) available on its investor relations and SEC websites, and disseminates material information via press releases, social media, and webcasts - Couchbase files its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments with the SEC[76](index=76&type=chunk) - These reports are available free of charge on the company's investor relations website (investors.couchbase.com) and the SEC's website (www.sec.gov)[76](index=76&type=chunk) - Material information is also announced through press releases, social media (Twitter, Facebook, LinkedIn), public conference calls, and webcasts to ensure broad distribution[78](index=78&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) This section details significant **risks** to Couchbase's business, **financial condition**, **results of operations**, and prospects, categorized by industry, third-party dependence, **intellectual property**, legal/regulatory environment, and governance [Risks Related to Our Industry and Business](index=17&type=section&id=Risks%20Related%20to%20Our%20Industry%20and%20Business) Couchbase faces industry and business **risks** including **net losses**, **growth rate** fluctuations, intense competition, **customer** acquisition challenges, market evolution, innovation needs, and impacts from **product** errors, service disruptions, and economic downturns - Couchbase has incurred **net losses** since inception (**$58.2M** in FY2022, **$40.0M** in FY2021, **$29.3M** in FY2020) and expects continued **losses** due to investments in platform development, **sales**, marketing, and infrastructure[80](index=80&type=chunk) Net Losses (Fiscal Years) | Fiscal Year | Net Loss (Millions USD) | |:------------|:------------------------| | 2022 | (58.2) | | 2021 | (40.0) | | 2020 | (29.3) | Revenue Growth (Fiscal Years) | Fiscal Year | Revenue (Millions USD) | |:------------|:-----------------------| | 2022 | 123.5 | | 2021 | 103.3 | | 2020 | 82.5 | - **Revenue growth rates** have fluctuated (**20%** in FY2022, **25%** in FY2021) and may decline due to slowing adoption, increased competition, market changes, or failure to capitalize on opportunities[81](index=81&type=chunk) - The company faces intense competition from legacy database providers (Oracle, IBM, Microsoft), NoSQL offerings (MongoDB), and cloud infrastructure providers (Amazon, Microsoft, Google), many of whom have greater **resources**[87](index=87&type=chunk)[88](index=88&type=chunk) - The market for Couchbase's **products** is relatively new and evolving, and its future **success** depends on market **growth** and widespread adoption against alternative solutions[100](index=100&type=chunk) - The global COVID-19 pandemic has negatively impacted business by delaying projects, reducing **IT spending**, restricting **sales**/marketing, delaying collections, and impacting professional services delivery[122](index=122&type=chunk) - Real or perceived errors, failures, or bugs in **products**, or interruptions/**performance problems**, could adversely affect **growth**, business, **financial condition**, and **results of operations**, especially as **products** support mission-critical applications[129](index=129&type=chunk)[132](index=132&type=chunk) [Risks Related to Our Dependence on Third Parties](index=32&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Couchbase's business depends on third-party partners for market reach and service providers for operations, with **risks** including partner relationship failures, service disruptions, and reliance on potentially inaccurate third-party information - Dependence on partners (CSPs, ISVs, SIs, technology partners) for market reach and distribution means failure to maintain these relationships or partners promoting competitors could harm the business[162](index=162&type=chunk)[163](index=163&type=chunk) - Reliance on third-party service providers for cloud hosting, CRM, **financial systems**, etc., means disruptions or failures from these providers could lead to increased **costs**, delays, and operational issues, especially with Couchbase Capella's hosted functionality[165](index=165&type=chunk)[167](index=167&type=chunk) - Publicly referenced estimates and information from third-party sources are not independently verified, and any inaccuracies could harm the company's reputation and business[168](index=168&type=chunk) [Risks Related to Our Open Source and Intellectual Property](index=33&type=section&id=Risks%20Related%20to%20Our%20Open%20Source%20and%20Intellectual%20Property) Couchbase faces **risks** from open source software use and its licensing model, including potential vulnerabilities, source code release requirements, and increased competition, alongside substantial **costs** and challenges in protecting its **intellectual property** - Use of third-party open source software and making core portions of its own source code available (historically open source, now BSL 1.1) could negatively affect **sales**, lead to litigation, and allow competitors to access and use its technology[169](index=169&type=chunk) - Open source licenses may require releasing proprietary source code for modifications or derivative works, potentially reducing competitive advantages and leading to significant legal **expenses** or re-engineering efforts[171](index=171&type=chunk)[173](index=173&type=chunk) - The open source/source-available model may lower technology barriers to entry, making it easier for new and existing competitors to compete, potentially leading to **price reductions** and **loss of market share**[176](index=176&type=chunk) - The decision to license certain source code under BSL 1.1 (not an open source license) may harm adoption and reduce brand awareness[178](index=178&type=chunk) - Substantial **costs** are incurred in obtaining, maintaining, protecting, defending, and enforcing **intellectual property rights** (patents, trademarks, **trade secrets**), and any failure could reduce the **value** of software and brand[179](index=179&type=chunk)[180](index=180&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - **Intellectual property disputes** are costly, time-consuming, and could result in significant liability, **damages**, or limitations on the ability to use certain technologies[185](index=185&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Risks Related to Our Legal and Regulatory Environment](index=37&type=section&id=Risks%20Related%20to%20Our%20Legal%20and%20Regulatory%20Environment) Couchbase navigates a complex legal and regulatory environment, facing **risks** from evolving **data privacy laws**, **security breaches**, litigation, export controls, and changes in **tax** and accounting policies, all potentially leading to significant liabilities and reputational harm - The business is subject to a wide range of evolving **laws** and regulations (**data privacy**, **security**, **IP**, employment, anti-bribery, export controls), with non-compliance leading to investigations, **fines**, and reputational harm[191](index=191&type=chunk)[193](index=193&type=chunk) - **Security breaches** or unauthorized access to **data** (including **customer data**) could interrupt operations, harm reputation, result in significant remediation **costs**, regulatory investigations, litigation, and **financial liabilities**[195](index=195&type=chunk)[196](index=196&type=chunk)[199](index=199&type=chunk) - Compliance with global **data protection laws** like GDPR, CCPA, VCDPA, and CPA is complex and rapidly evolving, imposing stringent obligations, potential **fines** (e.g., up to **20 million euros** or **4%** of global **revenue** under GDPR), and requiring modifications to **data practices**[202](index=202&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) - Selling to heavily regulated organizations and governments is competitive, **expensive**, and time-consuming, with differing contract terms and compliance requirements that can increase liability and **costs**[222](index=222&type=chunk)[223](index=223&type=chunk) - Failure to comply with anti-bribery, anti-corruption, and anti-money laundering **laws** (e.g., FCPA) could result in sanctions, **fines**, and severe criminal or civil penalties[225](index=225&type=chunk)[227](index=227&type=chunk) - Governmental export control, **trade sanctions**, and import controls could impair international competitiveness or lead to liability for violations[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Changes in **tax laws**, challenges to **transfer pricing policies**, and limitations on the use of **net operating losses** (**NOLs**) could materially affect **financial condition** and **results of operations**[232](index=232&type=chunk)[233](index=233&type=chunk)[237](index=237&type=chunk)[239](index=239&type=chunk) - Changes in GAAP or incorrect estimates related to critical accounting policies (e.g., **revenue recognition**, **stock-based compensation**) could adversely affect reported **financial results**[244](index=244&type=chunk)[246](index=246&type=chunk) [Risks Related to Ownership of Our Common Stock and Governance Matters](index=47&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock%20and%20Governance%20Matters) **Risks** related to **common stock** ownership and governance include public company **costs**, reduced disclosure as an 'emerging **growth company**,' concentrated control, **stock price volatility**, dilution from future issuances, anti-takeover provisions, and reliance on analyst coverage - Operating as a public company incurs substantial legal, accounting, and compliance **costs**, and **demands** significant management attention, especially for a newly public entity[254](index=254&type=chunk)[255](index=255&type=chunk) - As an 'emerging **growth company**,' Couchbase utilizes reduced disclosure requirements, which may make its **common stock** less attractive to some investors and lead to market **volatility**[256](index=256&type=chunk)[258](index=258&type=chunk) - Executive officers, directors, and holders of **5%** or more of **common stock** have substantial control, limiting other **stockholders'** ability to influence important transactions like changes in control[260](index=260&type=chunk) - The market **price** of **common stock** may be volatile due to various factors, including overall market fluctuations, company **performance**, competitor actions, and analyst coverage[261](index=261&type=chunk)[263](index=263&type=chunk)[265](index=265&type=chunk) - **Sales** of substantial amounts of **common stock** by existing **stockholders** or the perception of such **sales** could cause the market **price** to decline and impair the ability to raise **capital**[266](index=266&type=chunk) - Future issuances of additional **stock** for financings, acquisitions, or equity **compensation plans** will dilute existing **stockholders**[267](index=267&type=chunk) - Delaware **law** and company bylaws contain anti-takeover provisions that could discourage, delay, or prevent a change in control, potentially depressing the **stock price**[269](index=269&type=chunk)[270](index=270&type=chunk) - The company does not intend to pay **dividends** for the foreseeable future, requiring **stockholders** to rely on **stock price appreciation** for **returns**[275](index=275&type=chunk) [Unresolved Staff Comments](index=51&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item confirms the absence of unresolved staff comments from the SEC [Properties](index=51&type=section&id=Item%202.%20Properties) Couchbase leases its Santa Clara headquarters and other domestic and international facilities, with plans for future expansion and associated **expenses** - Corporate headquarters are in Santa Clara, California, leasing approximately **46,000 square feet** until March **2025**[276](index=276&type=chunk) - Additional leased facilities are located in Austin, Texas (U.S.), and Tel Aviv, Israel, Bangalore, India, and London and Manchester, United Kingdom (international)[276](index=276&type=chunk) - All facilities are leased, and the company plans to expand, anticipating additional **expenses** for new or expanded spaces[276](index=276&type=chunk) [Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings) Couchbase may face ordinary course legal proceedings, but currently has no material adverse litigation, expensing legal fees as incurred and recording liabilities when probable and estimable - Couchbase may be subject to legal proceedings and claims in the ordinary course of business, including **intellectual property**, commercial, **product liability**, and employment litigation[277](index=277&type=chunk) - Legal fees and **costs** are **expensed** as incurred, and liabilities are recorded when a **loss** is probable and reasonably estimable[277](index=277&type=chunk) - Currently, there are no legal proceedings that, if determined adversely, would have a material adverse effect on the company's business, **financial condition**, **results of operations**, or **cash flows**[277](index=277&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Couchbase Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Couchbase's **common stock** began trading on Nasdaq in July **2021**, with **210 holders** of record as of January 31, 2022, and no **dividends** are expected, while **IPO proceeds** were used for general corporate purposes and **debt repayment** - Couchbase's **common stock** began trading on the Nasdaq Global Select Market under the symbol 'BASE' on July **22**, **2021**[280](index=280&type=chunk) - As of January 31, 2022, there were approximately **210 holders** of record of **common stock**[281](index=281&type=chunk) - The company has never declared or paid **cash dividends** and does not expect to in the foreseeable future, intending to retain **earnings** for business operations and expansion[282](index=282&type=chunk) - No equity securities were sold unregistered, and no issuer purchases of equity securities occurred during the three months ended January 31, 2022[283](index=283&type=chunk)[284](index=284&type=chunk) - The **IPO**, completed on July **26**, **2021**, generated **$214.9 million** in **net proceeds**, used for general corporate purposes, including **working capital**, operating **expenses**, **capital expenditures**, and repaying **$25.0 million** of outstanding **debt** under the **Credit Facility**[288](index=288&type=chunk) [Reserved](index=53&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Couchbase's **financial condition** and **results** for fiscal years 2020-2022, covering business overview, **revenue model**, COVID-19 impact, key **metrics**, non-GAAP measures, liquidity, and critical accounting policies [Overview](index=54&type=section&id=Overview) Couchbase offers a leading modern database for mission-critical enterprise applications, combining relational and NoSQL capabilities, achieving **$123.5 million revenue** in fiscal 2022 despite **net losses** - Couchbase offers a modern database for enterprise applications, emphasizing high **performance**, reliability, scalability, and agility for mission-critical operations across diverse environments[291](index=291&type=chunk)[292](index=292&type=chunk) - The platform combines relational database strengths with NoSQL flexibility, catering to enterprise architects and application developers[292](index=292&type=chunk) Key Financial Highlights (Fiscal Years) | Metric | FY2022 (Millions USD) | FY2021 (Millions USD) | FY2020 (Millions USD) | |:------------|:----------------------|:----------------------|:----------------------| | Revenue | 123.5 | 103.3 | 82.5 | | Net Loss | (58.2) | (40.0) | (29.3) | | ARR | 132.9 | 107.8 | N/A | - **Revenue growth rates** were **20%** for FY2022 and **25%** for FY2021. **ARR** grew **23%** from FY2021 to FY2022[295](index=295&type=chunk) [Our Business Model](index=55&type=section&id=Our%20Business%20Model) Couchbase's business model primarily relies on **subscription revenue** (**94%** in FY2022) from its Enterprise Edition and Capella DBaaS, complemented by services, employing a 'sell-to' and 'buy-from' go-to-market strategy with a 'land-and-expand' focus - **Subscription revenue** accounts for the substantial majority of **total revenue** (**94%** in FY2022, **94%** in FY2021, **93%** in FY2020)[296](index=296&type=chunk) - **Subscription revenue** is primarily from the Enterprise Edition (Couchbase Server, Couchbase Mobile), licensed per node based on computing power, memory, and service level (Platinum, Gold, Silver)[296](index=296&type=chunk) - Couchbase Capella is licensed via an on-demand consumption model or an annual **credit model**, offering flexibility and **volume discounts**[298](index=298&type=chunk) - Services **revenue** (**7%** in FY2020, **6%** in FY2021, **6%** in FY2022) is derived from professional services and training, supporting **customer success** and platform adoption[299](index=299&type=chunk) - Go-to-market strategy focuses on large enterprises with a 'sell-to' motion and application developers with a 'buy-from' motion, utilizing free Community Editions and trials[300](index=300&type=chunk)[302](index=302&type=chunk) - Employs a 'land-and-expand' model, with **sales** and **customer success teams** guiding **customers** to realize strategic use cases and drive greater platform adoption[304](index=304&type=chunk) [Impact of COVID-19](index=56&type=section&id=Impact%20of%20COVID-19) COVID-19 negatively impacted Couchbase through project delays and reduced **IT spending**, but also accelerated cloud modernization, with the company now seeing recovery and expecting **growth** as economic conditions improve - COVID-19 negatively impacted business by delaying digital transformation, reducing **IT spending**, restricting **sales**/marketing, delaying collections, and delaying professional services delivery[305](index=305&type=chunk) - **Customers** in COVID-19 impacted industries (travel, hospitality, retail) reduced or failed to expand platform usage[306](index=306&type=chunk) - The pandemic has the potential to accelerate cloud modernization and re-architecture of mission-critical applications, benefiting Couchbase's platform due to TCO benefits[307](index=307&type=chunk) - **Cost savings** were realized from reduced business travel, deferred hiring, and virtualized events[309](index=309&type=chunk) - Signs of recovery include increased **spending** from COVID-19 impacted **customers** and improved **sales productivity**, with expectations for accelerated **growth**[310](index=310&type=chunk) [Factors Affecting Our Performance](index=57&type=section&id=Factors%20Affecting%20Our%20Performance) Couchbase's **performance** is driven by new **customer acquisition**, expansion within existing **customers** (evidenced by a **dollar-based net retention rate over 115%**), and continuous investment in offerings and infrastructure - **Growth** is driven by acquiring new **customers**, influenced by **sales cycles**, marketing, and modern application adoption, with Couchbase Capella expected to be a key driver[311](index=311&type=chunk) - Expansion within existing **customers** is a significant **growth driver**, achieved through increased deployment scale and new use cases, supported by professional services[312](index=312&type=chunk) - **Dollar-based net retention rate** has been **over 115%** in **seven** of the past **eight quarters**, indicating successful expansion within existing **customers**[312](index=312&type=chunk) - Continuous investment in offerings, personnel, geographic presence, and infrastructure is essential for future **growth** and innovation[314](index=314&type=chunk) [Key Business Metrics](index=58&type=section&id=Key%20Business%20Metrics) Couchbase tracks key business **metrics** including **Annual Recurring Revenue** (**$132.9 million** as of January 31, 2022, a **23%** year-over-year **growth**) and **customer count** (**590** as of January 31, 2022) Annual Recurring Revenue (ARR) | Metric | As of January 31, 2022 (in millions) | As of January 31, 2021 (in millions) | |:-------|:-------------------------------------|:-------------------------------------| | ARR | $132.9 | $107.8 | - **ARR** grew by **23%** year-over-year, from **$107.8 million** in FY2021 to **$132.9 million** in FY2022[316](index=316&type=chunk)[317](index=317&type=chunk) Number of Customers | Metric | As of January 31, 2022 | As of January 31, 2021 | |:----------|:-----------------------|:-----------------------| | Customers | 590 | 541 | - The **total number of customers** increased from **541** in FY2021 to **590** in FY2022[319](index=319&type=chunk) [Non-GAAP Financial Measures](index=58&type=section&id=Non-GAAP%20Financial%20Measures) Couchbase utilizes non-GAAP **financial measures**, excluding **stock-based compensation** and litigation **expenses**, to assess underlying **performance**, reporting a **free cash flow of $(42.4) million** in FY2022 Non-GAAP Gross Profit and Margin (Fiscal Years) | Metric | FY2022 (Thousands USD) | FY2021 (Thousands USD) | FY2020 (Thousands USD) | |:------------------|:-----------------------|:-----------------------|:-----------------------| | Total Revenue | 123,542 | 103,285 | 82,521 | | Gross Profit | 108,761 | 91,668 | 74,719 | | Stock-based Comp. | 392 | 123 | 76 | | Non-GAAP GP | 109,153 | 91,791 | 74,795 | | Gross Margin | 88.0% | 88.8% | 90.5% | | Non-GAAP GM | 88.4% | 88.9% | 90.6% | Non-GAAP Operating Loss and Margin (Fiscal Years) | Metric | FY2022 (Thousands USD) | FY2021 (Thousands USD) | FY2020 (Thousands USD) | |:------------------------|:-----------------------|:-----------------------|:-----------------------| | Total Revenue | 123,542 | 103,285 | 82,521 | | Loss from Operations | (56,258) | (33,080) | (30,343) | | Stock-based Comp. | 10,750 | 4,671 | 3,418 | | Litigation-related Exp. | — | 213 | 4,139 | | Non-GAAP Op. Loss | (45,508) | (28,196) | (22,786) | | Operating Margin | (46)% | (32)% | (37)% | | Non-GAAP Op. Margin | (37)% | (27)% | (28)% | Non-GAAP Net Loss and EPS (Fiscal Years) | Metric | FY2022 (Thousands USD) | FY2021 (Thousands USD) | FY2020 (Thousands USD) | |:----------------------------------------|:-----------------------|:-----------------------|:-----------------------| | Net Loss Attributable to Common Stock. | (61,146) | (44,059) | (29,257) | | Stock-based Comp. | 10,750 | 4,671 | 3,418 | | Litigation-related Exp. | — | 213 | 4,139 | | Gain from Legal Settlement | — | — | (6,565) | | Non-GAAP Net Loss Attributable to Common Stock. | (50,396) | (39,175) | (28,265) | | GAAP Net Loss Per Share | (2.37) | (7.71) | (5.33) | | Non-GAAP Net Loss Per Share | (1.96) | (6.85) | (5.15) | | Weighted Average Shares Outstanding | 25,777 | 5,717 | 5,489 | Free Cash Flow (Fiscal Years) | Metric | FY2022 (Thousands USD) | FY2021 (Thousands USD) | FY2020 (Thousands USD) | |:--------------------------------------|:-----------------------|:-----------------------|:-----------------------| | Net Cash Used in Operating Activities | (41,574) | (39,178) | (21,757) | | Less: Purchases of Property & Equip. | (819) | (2,819) | (4,710) | | Free Cash Flow | (42,393) | (41,997) | (26,467) | [Components of Results of Operations](index=60&type=section&id=Components%20of%20Results%20of%20Operations) Couchbase's **results of operations** are driven by **subscription** and services **revenue**, with **costs** primarily from personnel, cloud infrastructure, and capitalized software amortization, alongside operating **expenses**, interest, and **taxes** - **Revenue** is derived from **subscriptions** (software licenses and post-contract support, PCS) and services (professional services and training)[330](index=330&type=chunk) - License **revenue** is recognized upon transfer of software access, while PCS and services **revenue** are recognized ratably over the term or over time[330](index=330&type=chunk) - **Cost of subscription revenue** includes personnel, software, cloud infrastructure, and amortization of capitalized internal-use software related to Couchbase Capella[332](index=332&type=chunk) - **Cost of services revenue** includes personnel, third-party partners, and travel **expenses**[333](index=333&type=chunk) - Operating **expenses** (**R&D**, **Sales & Marketing**, **G&A**) are primarily driven by **personnel-related costs** and are expected to increase in absolute **dollars** as the business grows[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - **Interest expense**, other **income**/**expense** (**net**), and provision for **income taxes** also affect the **results of operations**[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) [Results of Operations (Comparison of Fiscal 2022 and Fiscal 2021)](index=62&type=section&id=Results%20of%20Operations) In fiscal 2022, **total revenue** grew **20%** to **$123.5 million**, driven by **subscription** and services **growth**, but increased operating **expenses** and foreign currency **losses** led to a **net loss of $58.2 million**, despite a **91%** decrease in **interest expense** Consolidated Statements of Operations (in thousands) | Metric | FY2022 | FY2021 | FY2020 | |:-----------------------------|:----------|:----------|:----------| | License Revenue | $19,008 | $14,032 | $11,128 | | Support and Other Revenue | $97,279 | $82,904 | $65,472 | | Total Subscription Revenue | $116,287 | $96,936 | $76,600 | | Services Revenue | $7,255 | $6,349 | $5,921 | | **Total Revenue** | **$123,542**| **$103,285**| **$82,521** | | Cost of Subscription Revenue | $8,529 | $6,074 | $3,446 | | Cost of Services Revenue | $6,252 | $5,543 | $4,356 | | **Total Cost of Revenue** | **$14,781** | **$11,617** | **$7,802** | | **Gross Profit** | **$108,761**| **$91,668** | **$74,719** | | R&D Expenses | $51,639 | $39,000 | $31,672 | | Sales & Marketing Expenses | $89,372 | $70,248 | $57,829 | | G&A Expenses | $24,008 | $15,500 | $15,561 | | **Total Operating Expenses** | **$165,019**| **$124,748**| **$105,062**|\n| **Loss from Operations** | **$(56,258)**| **$(33,080)**| **$(30,343)**|\n| Interest Expense | $(656) | $(6,970) | $(4,657) |\n| Other Income (Expense), Net | $(300) | $1,111 | $6,509 |\n| Provision for Income Taxes | $1,015 | $1,044 | $766 |\n| **Net Loss** | **$(58,229)**| **$(39,983)**| **$(29,257)**| Revenue Growth (FY2022 vs FY2021) | Revenue Type | FY2022 (Thousands USD) | FY2021 (Thousands USD) | Change (Thousands USD) | % Change | |:-----------------------|:-----------------------|:-----------------------|:-----------------------|:---------| | License | 19,008 | 14,032 | 4,976 | 35% | | Support and other | 97,279 | 82,904 | 14,375 | 17% | | Total Subscription | 116,287 | 96,936 | 19,351 | 20% | | Services | 7,255 | 6,349 | 906 | 14% | | **Total Revenue** | **123,542** | **103,285** | **20,257** | **20%** | - **Subscription revenue** increased by **$19.4 million** (**20%**), with approximately **91%** of the increase attributable to **growth** from existing **customers**[348](index=348&type=chunk) - **Cost of subscription revenue** increased by **$2.5 million** (**40%**), primarily due to increased headcount and amortization of capitalized internal-use software related to Couchbase Capella[351](index=351&type=chunk) - **Gross margin** decreased from **88.8%** in FY2021 to **88.0%** in FY2022, mainly due to the amortization of capitalized internal-use software for Couchbase Capella[351](index=351&type=chunk)[352](index=352&type=chunk) - **Research and development expenses** increased by **$12.6 million** (**32%**), driven by higher **personnel-related costs** due to increased headcount[353](index=353&type=chunk) - **Sales and marketing expenses** increased by **$19.1 million** (**27%**), primarily due to increased **personnel-related costs** and marketing program **expenses**[356](index=356&type=chunk) - **General and administrative expenses** increased by **$8.5 million** (**55%**), mainly due to increased **personnel-related costs** and professional fees associated with being a public company[357](index=357&type=chunk) - **Interest expense** decreased by **$6.3 million** (**91%**) due to the termination of a term loan and replacement with a **Credit Facility** with a lower **interest rate** and **balance**[358](index=358&type=chunk) - Other **income** (**expense**), **net** decreased by **$1.4 million** (**127%**) due to an increase in **net foreign currency transaction losses**[359](index=359&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) Couchbase's liquidity is supported by **$214.9 million IPO proceeds** and **$206.0 million** in **cash** and investments as of January 31, 2022, deemed sufficient for the next **12 months** despite historical **losses**, with **$161.6 million** in remaining **performance obligations** - Operations are financed through **subscription**/services **revenue** and **$214.9 million net proceeds** from the July **2021 IPO**[362](index=362&type=chunk) - As of January 31, 2022, **cash**, **cash equivalents**, and **short-term investments** totaled **$206.0 million**, with a **$40.0 million revolving line of credit** available[362](index=362&type=chunk) - Despite historical **net losses** and **negative operating cash flows**, current liquidity is believed sufficient for the next **12 months**[362](index=362&type=chunk) - Remaining **performance obligations** were **$161.6 million** as of January 31, 2022, with **$98.0 million** expected to be recognized in the next **12 months**[362](index=362&type=chunk) [Cash Flows](index=66&type=section&id=Cash%20Flows) In fiscal 2022, **cash used in operating activities** was **$41.6 million**, investing activities used **$92.0 million** (primarily for investments), while **financing activities** provided **$192.4 million** (driven by **IPO proceeds**) Summary of Cash Flows (in thousands) | Activity | FY2022 | FY2021 | FY2020 | |:--------------------------|:----------|:----------|:----------| | Operating Activities | $(41,574) | $(39,178) | $(21,757) | | Investing Activities | $(92,030) | $(22,412) | $(4,710) |\n| Financing Activities | $192,410 | $80,501 | $35,780 | - **Cash used in operating activities** for FY2022 was **$41.6 million**, driven by **net loss** (**$58.2M**) and increases in **deferred commissions** (**$20.5M**) and **prepaid expenses** (**$6.2M**), partially offset by increases in **deferred revenue** (**$10.0M**) and **accrued compensation** (**$7.0M**)[366](index=366&type=chunk) - **Cash used in investing activities** for FY2022 was **$92.0 million**, primarily from **net purchases of short-term investments** (**$91.2M**)[368](index=368&type=chunk) - **Cash provided by financing activities** for FY2022 was **$192.4 million**, mainly from **IPO proceeds** (**$214.9M**) and **stock option exercises** (**$7.5M**), offset by **debt repayment** (**$25.0M**) and offering **costs** (**$4.9M**)[369](index=369&type=chunk) [Contractual Obligations and Commitments](index=67&type=section&id=Contractual%20Obligations%20and%20Commitments) Couchbase's contractual obligations include purchase commitments for cloud infrastructure and **subscription arrangements**, alongside operating lease commitments for office facilities - Contractual obligations consist of purchase obligations (third-party cloud infrastructure, **subscription arrangements**) and operating lease commitments (office facilities)[370](index=370&type=chunk) [Indemnification Agreements](index=67&type=section&id=Indemnification%20Agreements) Couchbase provides indemnification to **customers**, partners, directors, and officers for various liabilities, with no material **demands** or expected **financial impact** to date - Couchbase indemnifies **customers**, vendors, lessors, and partners for **losses** from **intellectual property infringement**, contract breaches, and other liabilities[371](index=371&type=chunk) - Directors and officers are also indemnified against certain liabilities[371](index=371&type=chunk) - No material **demands** have been made to date, and no claims are expected to have a material effect on **financial condition**, **results of operations**, or **cash flows**[371](index=371&type=chunk) [Critical Accounting Policies and Estimates](index=68&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Couchbase's **financial statements** rely on critical accounting estimates for **revenue recognition**, capitalized software, **deferred commissions**, **stock-based compensation**, and **income taxes**, with the company electing the extended transition period for new accounting standards - Critical accounting estimates include **standalone selling prices** (**SSP**) for **performance obligations**, capitalized internal-use software **costs**, expected period of benefit for **deferred commissions**, **valuation of common stock** and **stock-based compensation**, **allowance for doubtful accounts**, and accounting for **income taxes**[378](index=378&type=chunk) - **Revenue recognition** involves significant judgment in determining distinct **performance obligations** (software license and PCS) and allocating **transaction price** based on relative **SSP**[376](index=376&type=chunk)[377](index=377&type=chunk) - **Stock-based compensation fair value** is estimated using the Black-Scholes model for options and ESPP, and Monte Carlo simulation for market-based RSUs, requiring subjective assumptions like expected term, **volatility**, and **risk-free interest rate**[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk) - Couchbase elected the extended transition period under the JOBS Act for new accounting standards[382](index=382&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Couchbase faces market **risks** from **interest rate** and foreign currency fluctuations, with its short-term, liquid investment portfolio limiting **interest rate impact**, and no hedging activities undertaken to date - Primary market **risks** are fluctuations in **interest rates** and foreign currency exchange **rates**[383](index=383&type=chunk) - Investment portfolio (money market funds, commercial paper, corporate **debt securities**) is highly liquid and short-term, so a **10% change** in **interest rates** is not expected to materially affect **results**[384](index=384&type=chunk)[385](index=385&type=chunk) - Foreign subsidiaries use the U.S. **Dollar** as functional currency, with remeasurement adjustments recognized in other **income** (**expense**), **net**. Increased international **sales** could heighten foreign currency **risk**[386](index=386&type=chunk) - Couchbase has not engaged in foreign currency hedging transactions to date[386](index=386&type=chunk) [Financial Statements and Supplementary Data](index=70&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides Couchbase's audited consolidated **financial statements** for fiscal years 2020-2022, including **balance sheets**, **statements of operations**, comprehensive **loss**, equity, **cash flows**, and detailed notes, along with the independent auditor's report [Report of Independent Registered Public Accounting Firm](index=72&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion, affirming Couchbase's consolidated **financial statements** for fiscal years 2020-2022 fairly present its **financial position**, **results**, and **cash flows** in conformity with U.S. GAAP - PricewaterhouseCoopers LLP provided an unqualified opinion on Couchbase, Inc.'s consolidated **financial statements** for the periods ended January 31, 2022, 2021, and 2020[391](index=391&type=chunk) - The **financial statements** are presented fairly, in all material respects, in conformity with U.S. GAAP[391](index=391&type=chunk) [Consolidated Balance Sheets](index=73&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2022, **total assets** increased to **$276.7 million**, **liabilities** decreased to **$93.5 million**, and **stockholders' equity** shifted to a positive **$183.2 million** due to the **IPO** and preferred **stock conversion** Consolidated Balance Sheets (in thousands) | Metric | As of January 31, 2022 | As of January 31, 2021 | |:--------------------------------------------------------------------|:-----------------------|:-----------------------| | **Assets** | | | | Cash and cash equivalents | $95,688 | $37,297 | | Short-term investments | $110,266 | $19,546 | | Accounts receivable, net | $36,696 | $35,897 | | Deferred commissions (current) | $11,783 | $8,353 | | Prepaid expenses and other current assets | $8,559 | $2,449 | | Total current assets | $262,992 | $103,542 | | Property and equipment, net | $4,288 | $6,506 | | Deferred commissions (noncurrent) | $8,243 | $4,941 | | Other assets | $1,219 | $2,199 | | **Total assets** | **$276,742** | **$117,188** | | **Liabilities** | | | | Accounts payable | $1,923 | $2,428 | | Accrued compensation and benefits | $16,143 | $9,110 | | Other accrued expenses | $3,231 | $4,154 | | Deferred revenue (current) | $69,010 | $57,168 |\n| Total current liabilities | $90,307 | $72,860 |\n| Long-term debt | — | $24,948 |\n| Deferred revenue (noncurrent) | $2,713 | $4,542 |\n| Other liabilities | $507 | $1,358 |\n| **Total liabilities** | **$93,527** | **$103,708** |\n| Redeemable convertible preferred stock | — | $259,822 |\n| **Stockholders' Equity (Deficit)** | | |\n| Additional paid-in capital | $525,392 | $37,410 |\n| Accumulated other comprehensive income (loss) | $(195) | $1 |\n| Accumulated deficit | $(341,982) | $(283,753) |\n| **Total stockholders' equity (deficit)** | **$183,215** | **$(246,342)** |\n| **Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)** | **$276,742** | **$117,188** | - **Total assets** increased significantly from **$117.2 million** in FY2021 to **$276.7 million** in FY2022, primarily due to increases in **cash**, **cash equivalents**, and **short-term investments**[396](index=396&type=chunk) - **Total liabilities** decreased from **$103.7 million** in FY2021 to **$93.5 million** in FY2022, mainly due to the **repayment of long-term debt**[397](index=397&type=chunk) - **Stockholders' equity** shifted from a **deficit of $(246.3) million** in FY2021 to a positive **$183.2 million** in FY2022, reflecting the impact of the **IPO** and conversion of preferred **stock**[398](index=398&type=chunk) [Consolidated Statements of Operations](index=74&type=section&id=Consolidated%20Statements%20of%20Operations) Couchbase's **total revenue** increased to **$123.5 million** in fiscal 2022, but higher operating **expenses** led to an increased **net loss of $58.2 million**, resulting in a **$(2.37) net loss per share** Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | FY2022 | FY2021 | FY2020 | |:-----------------------------|:----------|:----------|:----------| | License Revenue | $19,008 | $14,032 | $11,128 | | Support and Other Revenue | $97,279 | $82,904 | $65,472 | | Total Subscription Revenue | $116,287 | $96,936 | $76,600 | | Services Revenue | $7,255 | $6,349 | $5,921 | | **Total Revenue** | **$123,542**| **$103,285**| **$82,521** | | Cost of Subscription Revenue | $8,529 | $6,074 | $3,446 |\n| Cost of Services Revenue | $6,252 | $5,543 | $4,356 |\n| **Total Cost of Revenue** | **$14,781** | **$11,617** | **$7,802** |\n| **Gross Profit** | **$108,761**| **$91,668** | **$74,719** |\n| R&D Expenses | $51,639 | $39,000 | $31,672 |\n| Sales & Marketing Expenses | $89,372 | $70,248 | $57,829 |\n| G&A Expenses | $24,008 | $15,500 | $15,561 |\n| **Total Operating Expenses** | **$165,019**| **$124,748**| **$105,062**|\n| **Loss from Operations** | **$(56,258)**| **$(33,080)**| **$(30,343)**|\n| Interest Expense | $(656) | $(6,970) | $(4,657) |\n| Other Income (Expense), Net | $(300) | $1,111 | $6,509 |\n| Provision for Income Taxes | $1,015 | $1,044 | $766 |\n| **Net Loss** | **$(58,229)**| **$(39,983)**| **$(29,257)**|\n| Net Loss Attributable to Common Stockholders | $(61,146) | $(44,059) | $(29,257) |\n| Net Loss Per Share, Basic and Diluted | $(2.37) | $(7.71) | $(5.33) |\n| Weighted-Average Shares | 25,777 | 5,717 | 5,489 | - **Total revenue** increased by **20%** from **$103.3 million** in FY2021 to **$123.5 million** in FY2022[401](index=401&type=chunk) - **Net loss** increased from **$39.9 million** in FY2021 to **$58.2 million** in FY2022[401](index=401&type=chunk) - Operating **expenses** increased significantly, with **R&D** up **32%** and **Sales & Marketing** up **27%** from FY2021 to FY2022[353](index=353&type=chunk)[356](index=356&type=chunk) - **Interest expense** decreased by **91%** from FY2021 to FY2022[358](index=358&type=chunk) [Consolidated Statements of Comprehensive Loss](index=75&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Couchbase reported a **total comprehensive loss of $58.4 million** in fiscal 2022, comprising a **net loss of $58.2 million** and **$(0.2) million** in **net unrealized investment losses** Consolidated Statements of Comprehensive Loss (in thousands) | Metric | FY2022 | FY2021 | FY2020 | |:------------------------------------------|:----------|:----------|:----------| | Net Loss | $(58,229) | $(39,983) | $(29,257) | | Net Unrealized Gains (Losses) on Investments, Net of Tax | $(196) | $1 | — | | **Total Co

Couchbase, Inc. (NASDAQ:BASE) Q4 2022 Earnings Conference Call March 9, 2022 5:00 PM ET Company Participants Edward Parker - Head, IR Matt Cain - President and CEO Greg Henry - CFO Conference Call Participants Raimo Lenschow - Barclays Jason Ader - William Blair Sanjit Singh - Morgan Stanley Rob Oliver - Baird Matt Hedberg - RBC Capital Markets Rob Galvin - Stifel Param Singh - Oppenheimer Operator Ladies and gentlemen, thank you for standing by and welcome to Couchbase's Fourth Quarter 2022 Earnings Call. ...

Business Overview - Couchbase is positioned as the modern database for enterprise applications, emphasizing its ability to handle both relational and NoSQL aspects [8, 11] - The company highlights the increasing need for modern databases due to the rise of highly interactive applications and the limitations of legacy systems [15, 17] - Couchbase Capella, the Database-as-a-Service offering, combines the platform's strengths with the convenience of a managed service [27] Financial Performance - The company's Annual Recurring Revenue (ARR) reached $133 million, with a subscription revenue growth of 20% [44] - Couchbase has approximately 600 total customers, with 230 customers contributing more than $100,000 in ARR and 26 customers contributing over $1 million in ARR [44] - The company's subscription revenue demonstrates a high percentage of total revenue, exceeding 90%, coupled with a Dollar-Based Net Retention Rate (NRR) of over 115% [44] - The company's revenue for FY22 was $123.5 million [53] Operational Expenses - The company's Non-GAAP operating expenses as a percentage of revenue were 115% for FY22 and 112% for Q4 2021 [61] - Non-GAAP Research and Development (R&D) expenses accounted for 39% of revenue in FY22 and 35% in Q4 2022 [61] - Non-GAAP Sales and Marketing (S&M) expenses represented 69% of revenue in FY22 and 63% in Q4 2022 [61] Future Outlook - The company projects revenue of $147 million for FY23 [62] - The company projects ARR of $162 million for FY23 [62]

Business Overview - The operational DBMS market is accelerating due to a large, growing Total Addressable Market (TAM) and increasing digital transformation[11] - Couchbase is positioned as a modern database company with a proven enterprise business model, differentiating itself with the strengths of relational databases and the flexibility of NoSQL[11] - Customers are running their business and next-generation applications on Couchbase's modern database platform[11] Technology and Product Strategy - Couchbase is architecturally differentiated, offering a platform that is multi-modal, high-performance, flexible, easy to operate, and runs anywhere[26, 25] - Couchbase offers a portfolio of cloud options, including Couchbase Capella, a fully managed Database as a Service (DBaaS) offering[28, 30] - The company's cloud-native core platform supports Kubernetes on all clouds and is built for microservices[31] Financial Highlights (Q3 F22) - Couchbase achieved $122 million in Annual Recurring Revenue (ARR), representing 20% growth[41] - Subscription revenue accounted for over 90% of total revenue, with a 115% Dollar-Based Net Retention Rate (NRR)[41] - The company has a strong customer base of over 550 total customers, with over 30% being Fortune 100 companies[41] - Gross margins are strong at 88%, with an ARR per customer of $215,000[41] - Couchbase has 218 customers with over $100,000 in ARR[41] Growth Vectors - Couchbase is investing in CB Capella and its 7 platform, as well as go-to-market strategies[41] - The company sees multiple growth vectors supported by secular tailwinds, including further cloud investments and enterprises focusing on digital transformation[62] - The company is focused on a "buy-from" model targeting application developers to drive adoption, complemented by a "sell-to" model targeting enterprise architects[40]

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements, cautioning investors about inherent risks and uncertainties [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) This section defines forward-looking statements, their scope across financial and operational aspects, and highlights their inherent risks and uncertainties - Forward-looking statements relate to future events or financial/operating performance, identified by words such as "may," "will," "should," "expect," "plan," "anticipate," "could," "would," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential" or "continue"[5](index=5&type=chunk) - Key areas covered by forward-looking statements include future financial performance, liquidity, product demand, customer retention, new product development, competition, COVID-19 impact, regulatory effects, risk management, market evolution, brand protection, infrastructure security, growth management, third-party relationships, intellectual property, open source software, acquisitions, and public company expenses[5](index=5&type=chunk) - These statements are based primarily on current expectations and projections about future events and trends, and their outcomes are subject to risks, uncertainties, and other factors described in the 'Risk Factors' section[7](index=7&type=chunk) [Risk Factor Summary](index=4&type=section&id=RISK%20FACTOR%20SUMMARY) This section summarizes the main risks and uncertainties that could significantly harm the company's business, financial condition, and future prospects [Principal Risk Factors](index=4&type=section&id=Principal%20Risk%20Factors) This section summarizes key risks including net losses, intense competition, customer acquisition challenges, market evolution, and operational issues - The company has a history of net losses and may not achieve or maintain profitability in the future, nor continue to grow at historical rates[11](index=11&type=chunk) - Intense competition, failure to cost-effectively acquire new customers or expand existing ones, and the relatively new and evolving market for products and services pose significant risks[11](index=11&type=chunk) - Risks include failure to innovate, limited operating history, significant fluctuations in future results, and the impact of the global COVID-19 pandemic and economic downturns[11](index=11&type=chunk) - Operational risks encompass real or perceived errors in products, interruptions in technology infrastructure, and the quality of customer support[11](index=11&type=chunk) - Other risks involve reliance on internal operational metrics, maintaining company culture, challenges with acquisitions, partner relationships, use of third-party open source software, and intellectual property protection[11](index=11&type=chunk)[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, changes in equity, and cash flows - The financial statements are unaudited and prepared in accordance with GAAP and applicable SEC rules for interim financial reporting, with certain footnotes condensed or omitted[37](index=37&type=chunk) - The results of operations for the three and nine months ended October 31, 2021, are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2022, or any other future period[37](index=37&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :--------- | :--------- | | **Assets** | | | | | | Cash and cash equivalents | $141,440 | $37,297 | $104,143 | 279.2% | | Short-term investments | $66,195 | $19,546 | $46,649 | 238.7% | | Accounts receivable, net | $22,525 | $35,897 | $(13,372) | -37.3% | | Total current assets | $247,566 | $103,542 | $144,024 | 139.1% | | Total assets | $259,689 | $117,188 | $142,501 | 121.6% | | **Liabilities** | | | | | | Deferred revenue (current) | $48,226 | $57,168 | $(8,942) | -15.6% | | Long-term debt | $0 | $24,948 | $(24,948) | -100.0% | | Total liabilities | $68,221 | $103,708 | $(35,487) | -34.2% | | **Stockholders' Equity (Deficit)** | | | | | | Total stockholders' equity (deficit) | $191,468 | $(246,342) | $437,810 | 177.7% | - The significant increase in cash and cash equivalents and total assets was primarily driven by the net proceeds from the Initial Public Offering (IPO) in July 2021[17](index=17&type=chunk)[38](index=38&type=chunk) - Long-term debt was fully repaid as of October 31, 2021, decreasing from **$24.9 million** as of January 31, 2021[18](index=18&type=chunk)[69](index=69&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total revenue | $30,824 | $25,653 | $5,171 | 20.2% | $88,478 | $73,858 | $14,620 | 19.8% | | Gross profit | $27,088 | $22,517 | $4,571 | 20.3% | $77,825 | $65,362 | $12,463 | 19.1% | | Loss from operations | $(15,491) | $(9,079) | $(6,412) | 70.6% | $(43,590) | $(25,076) | $(18,514) | 73.8% | | Net loss | $(15,924) | $(10,148) | $(5,776) | 56.9% | $(44,993) | $(30,336) | $(14,657) | 48.3% | | Net loss per share (basic and diluted) | $(0.37) | $(2.04) | $1.67 | -81.9% | $(2.43) | $(5.81) | $3.38 | -58.2% | | Weighted-average shares outstanding | 43,440 | 5,695 | 37,745 | 662.7% | 19,742 | 5,672 | 14,070 | 248.1% | - Total revenue increased by **20%** for the three months and **20%** for the nine months ended October 31, 2021, primarily due to growth from existing and new customers[148](index=148&type=chunk) - Net loss increased by **56.9%** for the three months and **48.3%** for the nine months ended October 31, 2021, reflecting continued investment in business growth[22](index=22&type=chunk)[109](index=109&type=chunk) - Net loss per share decreased significantly due to a substantial increase in weighted-average shares outstanding following the IPO[22](index=22&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section presents the net loss and other comprehensive income/loss components, leading to total comprehensive loss Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net loss | $(15,924) | $(10,148) | $(5,776) | 56.9% | $(44,993) | $(30,336) | $(14,657) | 48.3% | | Net unrealized gains (losses) on investments, net of tax | $(29) | $0 | $(29) | N/A | $(30) | $0 | $(30) | N/A | | Total comprehensive loss | $(15,953) | $(10,148) | $(5,805) | 57.2% | $(45,023) | $(30,336) | $(14,687) | 48.4% | - Total comprehensive loss increased by **57.2%** for the three months and **48.4%** for the nine months ended October 31, 2021, primarily reflecting the increase in net loss[25](index=25&type=chunk) [Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) This section outlines changes in redeemable convertible preferred stock and stockholders' equity, including impacts from the IPO - Upon the closing of the IPO in July 2021, all **26,710,600 shares** of redeemable convertible preferred stock automatically converted into common stock, reclassifying **$259.8 million** to common stock and additional paid-in capital[78](index=78&type=chunk) - Additional paid-in capital increased significantly from **$37.4 million** as of January 31, 2021, to **$520.2 million** as of October 31, 2021, primarily due to IPO proceeds and stock-based compensation[28](index=28&type=chunk) - Accumulated deficit increased from **$(283.8) million** as of January 31, 2021, to **$(328.7) million** as of October 31, 2021, reflecting ongoing net losses[28](index=28&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(38,922) | $(32,609) | $(6,313) | 19.4% | | Net cash used in investing activities | $(47,625) | $(16,915) | $(30,710) | 181.5% | | Net cash provided by financing activities | $190,848 | $79,427 | $111,421 | 140.3% | | Net increase in cash, cash equivalents and restricted cash | $104,143 | $29,897 | $74,246 | 248.3% | | Cash, cash equivalents and restricted cash, End of period | $141,983 | $48,664 | $93,319 | 191.8% | - Net cash provided by financing activities significantly increased by **140.3%** to **$190.8 million** for the nine months ended October 31, 2021, primarily due to **$214.9 million** in net proceeds from the IPO[33](index=33&type=chunk)[166](index=166&type=chunk) - Net cash used in investing activities increased by **181.5%** to **$47.6 million**, mainly due to higher purchases of short-term investments[33](index=33&type=chunk)[165](index=165&type=chunk) - Net cash used in operating activities increased by **19.4%** to **$38.9 million**, driven by a higher net loss and changes in operating assets and liabilities[33](index=33&type=chunk)[164](index=164&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Description of Business](index=12&type=section&id=1.%20Description%20of%20Business) This note describes Couchbase, Inc.'s core business as an enterprise-class, multi-cloud NoSQL database provider - Couchbase, Inc. provides an enterprise-class, multi-cloud NoSQL database architected on top of an open source foundation[36](index=36&type=chunk) - The company was incorporated in Delaware in 2008 and is headquartered in Santa Clara, California[36](index=36&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of financial statement preparation, significant accounting policies, and the impact of the IPO and reverse stock split - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim financial reporting, with certain footnotes condensed or omitted[37](index=37&type=chunk) - In July 2021, the company completed its IPO, issuing **9,589,999 shares** of common stock at **$24.00 per share**, resulting in **$214.9 million** in net proceeds and the automatic conversion of all outstanding redeemable convertible preferred stock[38](index=38&type=chunk) - A **2.5-for-1 reverse stock split** was effected on June 30, 2021, with all share and per share data retrospectively adjusted[39](index=39&type=chunk) - The company's fiscal year ends on January 31[40](index=40&type=chunk) - Management makes estimates and assumptions in preparing financial statements, which are subject to change and could differ from actual results, particularly concerning the impact of the COVID-19 pandemic[43](index=43&type=chunk)[44](index=44&type=chunk) - As an emerging growth company, Couchbase has elected to use the extended transition period for complying with new or revised accounting standards[46](index=46&type=chunk) [3. Cash Equivalents and Short-Term Investments](index=14&type=section&id=3.%20Cash%20Equivalents%20and%20Short-Term%20Investments) This note details the composition and fair value of cash equivalents and short-term investments Cash Equivalents and Short-Term Investments (in thousands) | Category | As of Oct 31, 2021 (Fair Value) | As of Jan 31, 2021 (Fair Value) | Change ($) | Change (%) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Money market funds | $136,673 | $31,438 | $105,235 | 334.7% | | Commercial paper | $36,854 | $12,290 | $24,564 | 200.0% | | Corporate debt securities | $26,344 | $7,256 | $19,088 | 263.1% | | U.S. government treasury securities | $2,997 | $0 | $2,997 | N/A | | Total short-term investments | $66,195 | $19,546 | $46,649 | 238.7% | | Total cash equivalents and short-term investments | $202,868 | $50,984 | $151,884 | 297.9% | - As of October 31, 2021, the company had 16 short-term investments in an unrealized loss position with an estimated fair value of **$29.3 million**, none of which were in a continuous unrealized loss position for more than twelve months[51](index=51&type=chunk) [4. Fair Value Measurements](index=15&type=section&id=4.%20Fair%20Value%20Measurements) This note explains the company's methodology for fair value measurements using a three-tiered hierarchy - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants[53](index=53&type=chunk) - The company uses a three-tiered hierarchy for fair value measurements: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[53](index=53&type=chunk) - Money market funds and U.S. government securities are classified as Level 1, while commercial paper and corporate debt securities are classified as Level 2[56](index=56&type=chunk) [5. Balance Sheet Components](index=16&type=section&id=5.%20Balance%20Sheet%20Components) This note provides detailed breakdowns of various balance sheet accounts, including prepaid expenses, property and equipment, and accrued liabilities Prepaid Expenses and Other Current Assets (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :--------- | :--------- | | Prepaid expenses | $5,238 | $803 | $4,435 | 552.3% | | Prepaid software | $2,181 | $1,380 | $801 | 58.0% | | Other current assets | $772 | $266 | $506 | 190.2% | | Total prepaid expenses and other current assets | $8,191 | $2,449 | $5,742 | 234.5% | Property and Equipment, Net (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :--------- | :--------- | | Total gross property and equipment | $11,462 | $10,871 | $591 | 5.4% | | Accumulated depreciation and amortization | $(6,479) | $(4,365) | $(2,114) | 48.4% | | Total property and equipment, net | $4,983 | $6,506 | $(1,523) | -23.4% | Accrued Compensation and Benefits (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :--------- | :--------- | | Accrued bonus | $3,295 | $4,149 | $(854) | -20.6% | | Accrued commissions | $2,486 | $2,364 | $122 | 5.2% | | Accrued payroll and benefits | $2,184 | $2,597 | $(413) | -15.9% | | Employee contributions under the ESPP | $1,961 | $0 | $1,961 | N/A | | Total accrued compensation and benefits | $9,926 | $9,110 | $816 | 9.0% | Other Accrued Liabilities (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :--------- | :--------- | | Accrued professional fees | $584 | $1,925 | $(1,341) | -69.7% | | Sales and value added tax payable | $264 | $415 | $(151) | -36.4% | | Income taxes payable | $237 | $436 | $(199) | -45.7% | | Accrued interest | $0 | $95 | $(95) | -100.0% | | Other | $1,445 | $1,283 | $162 | 12.6% | | Total other accrued liabilities | $2,530 | $4,154 | $(1,624) | -39.1% | [6. Deferred Revenue and Remaining Performance Obligations](index=17&type=section&id=6.%20Deferred%20Revenue%20and%20Remaining%20Performance%20Obligations) This note details deferred revenue and the company's remaining performance obligations from customer contracts Deferred Revenue (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Deferred revenue, current | $48,226 | $57,168 | $(8,942) | -15.6% | | Deferred revenue, noncurrent | $2,726 | $4,542 | $(1,816) | -40.0% | | Total deferred revenue | $50,952 | $61,710 | $(10,758) | -17.4% | - As of October 31, 2021, remaining performance obligations (RPOs) were **$124.3 million**, with **$76.7 million** expected to be recognized as revenue over the next twelve months[67](index=67&type=chunk) [7. Debt](index=17&type=section&id=7.%20Debt) This note outlines the company's debt obligations, including changes in long-term debt and interest expense Long-Term Debt (in thousands) | Metric | As of Oct 31, 2021 | As of Jan 31, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :--------- | :--------- | | Principal outstanding | $0 | $25,000 | $(25,000) | -100.0% | | Unamortized discount and debt issuance costs | $0 | $(52) | $52 | -100.0% | | Long-term debt | $0 | $24,948 | $(24,948) | -100.0% | Interest Expense (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Interest expense | $(133) | $(746) | $613 | -82.2% | $(630) | $(4,762) | $4,132 | -86.8% | - The term loan with Hercules Capital was fully terminated and paid off in January 2021[71](index=71&type=chunk) - The company repaid the outstanding principal of its revolving line of credit of **$25.0 million** during the three months ended October 31, 2021, with **$40.0 million** available for borrowing[72](index=72&type=chunk) [8. Commitments and Contingencies](index=19&type=section&id=8.%20Commitments%20and%20Contingencies) This note discloses the company's lease commitments, cloud hosting obligations, and potential legal matters - The company leases facilities for office space under non-cancelable operating leases with various expiration dates through March 2025[73](index=73&type=chunk) - In July 2021, the company negotiated a noncancelable arrangement with a cloud hosting service provider, committing to spend at least **$10.0 million** between August 2021 and July 2024[74](index=74&type=chunk) - The company is a party to various legal matters in the normal course of business and enters into standard indemnification arrangements for intellectual property infringement claims and for its directors and officers[75](index=75&type=chunk)[76](index=76&type=chunk) [9. Retirement Plan](index=19&type=section&id=9.%20Retirement%20Plan) This note describes the company's 401(k) retirement plan and matching contributions for employees - The company sponsors a defined contribution savings plan under Section 401(k) of the Internal Revenue Code, covering substantially all full-time U.S. employees[77](index=77&type=chunk) - The company matches its employee contributions to the 401(k) plan, with total matching contributions less than **$0.1 million** for each of the three months and **$0.2 million** for each of the nine months ended October 31, 2021 and 2020[77](index=77&type=chunk) [10. Stockholders' Equity (Deficit) and Employee Incentive Plans](index=19&type=section&id=10.%20Stockholders'%20Equity%20(Deficit)%20and%20Employee%20Incentive%20Plans) This note details changes in stockholders' equity, including the impact of the IPO, and information on stock option and RSU activity - Upon the IPO in July 2021, all **26,710,600 shares** of redeemable convertible preferred stock automatically converted into common stock, reclassifying **$259.8 million** to common stock and additional paid-in capital[78](index=78&type=chunk) - As of October 31, 2021, **43,566,467 shares** of common stock were issued and outstanding, compared to **6,199,305 shares** as of January 31, 2021[80](index=80&type=chunk) - The company has reserved **10,653,339 shares** of common stock for future issuance, including for stock options, common stock warrants, restricted stock units (RSUs), and the Employee Stock Purchase Plan (ESPP)[81](index=81&type=chunk) - The 2021 Equity Incentive Plan replaced previous plans, with **4.0 million shares** available for grant as of October 31, 2021, and an automatic annual increase provision[82](index=82&type=chunk) - The ESPP was established in July 2021, allowing eligible employees to purchase common stock at a price equal to **85%** of the lower of the fair market value at the beginning or end of the offering period[83](index=83&type=chunk) Stock Option Activity (9 Months Ended Oct 31, 2021) | Metric | Number of Options | Weighted-Average Exercise Price | Weighted-Average Contractual Term (years) | Aggregate Intrinsic Value (thousands) | | :------------------------------------------ | :---------------- | :------------------------------ | :---------------------------------------- | :------------------------------------ | | Balances as of Jan 31, 2021 | 8,912,477 | $6.42 | 6.49 | $38,582 | | Options exercised | (1,042,606) | $5.57 | N/A | N/A | | Options granted | 1,948,563 | $22.49 | N/A | N/A | | Options cancelled | (302,583) | $10.00 | N/A | N/A | | Balances as of Oct 31, 2021 | 9,515,851 | $9.69 | 6.72 | $291,474 | RSU Activity (9 Months Ended Oct 31, 2021) | Metric | Number of RSUs Outstanding | Weighted Average Grant Date Fair Value Per Share | | :------------------------------------------ | :------------------------- | :----------------------------------------------- | | Unvested Balance as of Jan 31, 2021 | 0 | $0 | | RSUs granted | 189,556 | $50.27 | | RSUs forfeited | (4,092) | $50.23 | | Unvested Balance as of Oct 31, 2021 | 185,464 | $50.27 | Stock-Based Compensation Expense (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total stock-based compensation expense | $3,353 | $1,135 | $7,163 | $3,342 | [11. Income Taxes](index=23&type=section&id=11.%20Income%20Taxes) This note explains the company's income tax expense and the valuation allowance maintained on U.S. deferred tax assets - Income tax expense was **$0.2 million** for each of the three months and **$0.7 million** for each of the nine months ended October 31, 2021 and 2020, primarily from foreign jurisdictions[98](index=98&type=chunk) - A full valuation allowance is maintained on substantially all U.S. deferred tax assets due to the company's history of losses[98](index=98&type=chunk) [12. Geographic Information](index=23&type=section&id=12.%20Geographic%20Information) This note provides a breakdown of revenue by geographic area and the location of long-lived assets Revenue by Geographic Area (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | United States | $18,618 | $16,324 | $2,294 | 14.1% | $55,001 | $47,690 | $7,311 | 15.3% | | International | $12,206 | $9,329 | $2,877 | 30.8% | $33,477 | $26,168 | $7,309 | 27.9% | | Total | $30,824 | $25,653 | $5,171 | 20.2% | $88,478 | $73,858 | $14,620 | 19.8% | - International revenue grew faster than U.S. revenue for both the three and nine months ended October 31, 2021[101](index=101&type=chunk) - Substantially all of the company's long-lived assets were located in the United States as of January 31, 2021, and October 31, 2021[103](index=103&type=chunk) [13. Net Loss per Share](index=24&type=section&id=13.%20Net%20Loss%20per%20Share) This note details the computation of basic and diluted net loss per share attributable to common stockholders Net Loss per Share Attributable to Common Stockholders (in thousands, except per share data) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net loss attributable to common stockholders | $(15,924) | $(11,594) | $(4,330) | 37.3% | $(47,910) | $(32,932) | $(14,978) | 45.5% | | Weighted-average shares outstanding | 43,440 | 5,695 | 37,745 | 662.7% | 19,742 | 5,672 | 14,070 | 248.1% | | Net loss per share (basic and diluted) | $(0.37) | $(2.04) | $1.67 | -81.9% | $(2.43) | $(5.81) | $3.38 | -58.2% | - Diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the company's net loss position[104](index=104&type=chunk) - Potentially dilutive securities excluded from the computation of diluted net loss per share include stock options, redeemable convertible preferred stock (in 2020), common stock warrants, RSUs, and employee stock purchase rights under the ESPP[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Couchbase's financial condition and operational results, including an overview of its business model, key performance drivers, and a detailed analysis of revenue, expenses, and liquidity - Couchbase's mission is to empower enterprises to build, manage, and operate modern mission-critical applications at the highest scale and performance using its leading modern database[108](index=108&type=chunk) - For the nine months ended October 31, 2021, revenue was **$88.5 million**, representing **20%** period-over-period growth, while net loss was **$45.0 million** due to continued investment in business growth[109](index=109&type=chunk) - Annual Recurring Revenue (ARR) grew by **21%** to **$122.3 million** as of October 31, 2021, and the total number of customers increased to **568**[109](index=109&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) [Overview](index=25&type=section&id=Overview) This section provides an overview of Couchbase's enterprise-class, multi-cloud NoSQL database platform and its market strategy - Couchbase provides an enterprise-class, multi-cloud NoSQL database designed for mission-critical applications, offering flexibility across cloud, multi-cloud, hybrid-cloud, and edge environments[108](index=108&type=chunk) - The platform combines NoSQL's schema flexibility with SQL query language, catering to both enterprise architects and application developers[108](index=108&type=chunk) - The company targets large global enterprises and introduced Couchbase Capella, a fully-managed DBaaS offering, in June 2020[108](index=108&type=chunk) [Initial Public Offering](index=26&type=section&id=Initial%20Public%20Offering) This section details the completion of Couchbase's IPO in July 2021, including net proceeds and stock conversion - In July 2021, Couchbase completed its IPO, issuing and selling **9,589,999 shares** of common stock at **$24.00 per share**, including shares from the underwriters' option[110](index=110&type=chunk) - The company received net proceeds of **$214.9 million** after deducting underwriting discounts and commissions[110](index=110&type=chunk) - All **26,710,600 shares** of outstanding redeemable convertible preferred stock automatically converted into an equivalent number of common stock shares in connection with the IPO[110](index=110&type=chunk) [Our Business Model](index=26&type=section&id=Our%20Business%20Model) This section describes the company's revenue generation from subscriptions and professional services, its go-to-market strategy, and land-and-expand model - The substantial majority of revenue is generated from subscriptions to the Enterprise Edition of the Couchbase platform (Couchbase Server and Mobile), licensed per node based on computing power, memory, and service level[111](index=111&type=chunk) - Couchbase Capella, a fully-managed DBaaS offering introduced in June 2020 and expanded in October 2021, is licensed using an on-demand consumption model or an annual credit model[111](index=111&type=chunk) - The company also generates revenue from professional services related to platform implementation, configuration, and training[111](index=111&type=chunk) - The go-to-market strategy includes a direct sales force targeting large enterprises and a "buy-from" motion focused on the application developer community through free Community Editions and trials[111](index=111&type=chunk) - The company employs a land-and-expand model, supported by a growing partner ecosystem and marketing efforts, resulting in a dollar-based net retention rate of at least **115%** for the past seven quarters[112](index=112&type=chunk) [Factors Affecting Our Performance](index=27&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses key drivers of performance, including customer acquisition, expansion within existing customers, and ongoing investments - Continued growth depends on acquiring new customers, with Couchbase Capella expected to become increasingly popular due to its compelling pricing, ease of operation, lower TCO, and flexibility[113](index=113&type=chunk) - A significant portion of growth is driven by expanding within existing customers, through increased deployment scale or new use cases, supported by the professional services organization[114](index=114&type=chunk) - The dollar-based net retention rate was at least **115%** for each of the past seven quarters, demonstrating successful expansion within existing customers[114](index=114&type=chunk) - The company plans to continue investing in its offerings, personnel (R&D, sales, marketing, G&A), geographic presence, and infrastructure to drive future growth and pursue adjacent opportunities[115](index=115&type=chunk) [Key Business Metrics](index=28&type=section&id=Key%20Business%20Metrics) This section defines and presents key business metrics such as Annual Recurring Revenue (ARR) and total customer count - Annual Recurring Revenue (ARR) is defined as the annualized recurring revenue contractually received from customers in the month ending 12 months following the given date, excluding on-demand arrangements and services[117](index=117&type=chunk) Annual Recurring Revenue (ARR) (in millions) | Metric | As of Oct 31, 2021 | As of Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------- | | ARR | $122.3 | $101.4 | $20.9 | 20.6% | - The total number of customers increased from **524** as of October 31, 2020, to **568** as of October 31, 2021[119](index=119&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP financial measures, including gross profit, operating loss, and net loss, by excluding specific items - Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense recorded to cost of revenue[120](index=120&type=chunk) Non-GAAP Gross Profit and Gross Margin (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Gross profit | $27,088 | $22,517 | $4,571 | 20.3% | $77,825 | $65,362 | $12,463 | 19.1% | | Add: Stock-based compensation expense | $136 | $30 | $106 | 353.3% | $239 | $91 | $148 | 162.6% | | Non-GAAP gross profit | $27,224 | $22,547 | $4,677 | 20.7% | $78,064 | $65,453 | $12,611 | 19.3% | | Gross margin | 87.9% | 87.8% | 0.1% | N/A | 88.0% | 88.5% | -0.5% | N/A | | Non-GAAP gross margin | 88.3% | 87.9% | 0.4% | N/A | 88.2% | 88.6% | -0.4% | N/A | - Non-GAAP operating loss and non-GAAP operating margin exclude stock-based compensation expense and litigation-related expenses[122](index=122&type=chunk) Non-GAAP Operating Loss and Operating Margin (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Loss from operations | $(15,491) | $(9,079) | $(6,412) | 70.6% | $(43,590) | $(25,076) | $(18,514) | 73.8% | | Add: Stock-based compensation expense | $3,353 | $1,135 | $2,218 | 195.4% | $7,163 | $3,342 | $3,821 | 114.3% | | Add: Litigation-related expenses | $0 | $0 | $0 | N/A | $0 | $213 | $(213) | -100.0% | | Non-GAAP operating loss | $(12,138) | $(7,944) | $(4,194) | 52.8% | $(36,427) | $(21,521) | $(14,906) | 69.3% | | Operating margin | (50)% | (35)% | -15% | N/A | (49)% | (34)% | -15% | N/A | | Non-GAAP operating margin | (39)% | (31)% | -8% | N/A | (41)% | (29)% | -12% | N/A | - Non-GAAP net loss and non-GAAP net loss per share exclude stock-based compensation expense and litigation-related expenses[124](index=124&type=chunk) Non-GAAP Net Loss and Net Loss Per Share (in thousands, except per share amounts) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net loss attributable to common stockholders | $(15,924) | $(11,594) | $(4,330) | 37.3% | $(47,910) | $(32,932) | $(14,978) | 45.5% | | Add: Stock-based compensation expense | $3,353 | $1,135 | $2,218 | 195.4% | $7,163 | $3,342 | $3,821 | 114.3% | | Add: Litigation-related expenses | $0 | $0 | $0 | N/A | $0 | $213 | $(213) | -100.0% | | Non-GAAP net loss attributable to common stockholders | $(12,571) | $(10,459) | $(2,112) | 20.2% | $(40,747) | $(29,377) | $(11,370) | 38.7% | | GAAP net loss per share | $(0.37) | $(2.04) | $1.67 | -81.9% | $(2.43) | $(5.81) | $3.38 | -58.2% | | Non-GAAP net loss per share | $(0.29) | $(1.84) | $1.55 | -84.2% | $(2.06) | $(5.18) | $3.12 | -60.2% | [Free Cash Flow](index=29&type=section&id=Free%20Cash%20Flow) This section defines and presents the company's free cash flow, calculated from operating activities less capital expenditures - Free cash flow is defined as cash used in operating activities less purchases of property and equipment, including capitalized internal-use software costs[126](index=126&type=chunk) Free Cash Flow (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(19,747) | $(13,143) | $(6,604) | 50.2% | $(38,922) | $(32,609) | $(6,313) | 19.4% | | Less: Purchases of property and equipment | $(564) | $(144) | $(420) | 291.7% | $(814) | $(2,770) | $1,956 | -70.6% | | Free cash flow | $(20,311) | $(13,287) | $(7,024) | 52.9% | $(39,736) | $(35,379) | $(4,357) | 12.3% | [Impact of COVID-19](index=30&type=section&id=Impact%20of%20COVID-19) This section analyzes the negative and potential long-term positive impacts of the COVID-19 pandemic on the company's business and operations - The COVID-19 pandemic negatively impacted business by delaying digital transformation projects, reducing IT spending, restricting sales/marketing efforts, delaying collections, and delaying professional services, particularly affecting 'COVID-19 impacted customers'[128](index=128&type=chunk) - ARR from 'COVID-19 impacted customers' declined by **3%** from **$14.1 million** as of April 30, 2020, to **$13.6 million** as of April 30, 2021, while ARR from all other customers increased by **27%** during the same period[128](index=128&type=chunk) - Potential long-term positive impacts include accelerated enterprise modernization and increased adoption of the platform due to its ability to support mission-critical applications with significant Total Cost of Ownership (TCO) benefits[129](index=129&type=chunk) - The pandemic also led to temporary cost savings from reduced business travel, deferred hiring, and virtualization/cancellation of events[129](index=129&type=chunk) [Components of Results of Operations](index=31&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the various components of revenue, cost of revenue, operating expenses, and other financial items - Revenue is derived from term-based software licenses ('License'), post-contract support ('Support and other') recognized ratably, and professional services ('Services') recognized over time[130](index=130&type=chunk) - Cost of subscription revenue includes personnel, software, cloud infrastructure, and amortization of capitalized internal-use software; cost of services revenue includes personnel, third-party partners, and travel[131](index=131&type=chunk) - Gross profit and margin are influenced by sales price, product mix, and geography, with gross margin expected to modestly decline long-term due to new offerings and international expansion[132](index=132&type=chunk) - Operating expenses (Research and Development, Sales and Marketing, General and Administrative) are primarily personnel-related costs and are expected to increase in absolute dollars due to investments in growth and public company operations[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk) - Interest expense relates to debt, and other income (expense), net, includes foreign currency gains/losses and interest income[138](index=138&type=chunk)[139](index=139&type=chunk) - Provision for income taxes primarily consists of income taxes in foreign jurisdictions, as a full valuation allowance is maintained against U.S. deferred tax assets[140](index=140&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's revenue, cost of revenue, gross profit, and operating expenses Revenue Comparison (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | License revenue | $3,774 | $3,010 | $764 | 25% | $12,468 | $8,550 | $3,918 | 46% | | Support and other revenue | $25,234 | $21,078 | $4,156 | 20% | $71,034 | $60,347 | $10,687 | 18% | | Total subscription revenue | $29,008 | $24,088 | $4,920 | 20% | $83,502 | $68,897 | $14,605 | 21% | | Services revenue | $1,816 | $1,565 | $251 | 16% | $4,976 | $4,961 | $15 | 0% | | Total revenue | $30,824 | $25,653 | $5,171 | 20% | $88,478 | $73,858 | $14,620 | 20% | - Subscription revenue increased by **20%** for the three months and **21%** for the nine months ended October 31, 2021, with approximately **81-82%** of the increase attributable to growth from existing customers[148](index=148&type=chunk) Cost of Revenue, Gross Profit, and Gross Margin Comparison (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Cost of subscription revenue | $2,094 | $1,840 | $254 | 14% | $6,218 | $4,113 | $2,105 | 51% | | Cost of services revenue | $1,642 | $1,296 | $346 | 27% | $4,435 | $4,383 | $52 | 1% | | Total cost of revenue | $3,736 | $3,136 | $600 | 19% | $10,653 | $8,496 | $2,157 | 25% | | Gross profit | $27,088 | $22,517 | $4,571 | 20% | $77,825 | $65,362 | $12,463 | 19% | | Gross margin | 87.9% | 87.8% | 0.1% | N/A | 88.0% | 88.5% | -0.5% | N/A | - Cost of subscription revenue increased by **51%** for the nine months ended October 31, 2021, primarily due to increased personnel-related costs and amortization of capitalized internal-use software related to Couchbase Capella[150](index=150&type=chunk) Operating Expenses Comparison (in thousands) | Metric | 3 Months Ended Oct 31, 2021 | 3 Months Ended Oct 31, 2020 | Change ($) | Change (%) | 9 Months Ended Oct 31, 2021 | 9 Months Ended Oct 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and development | $13,103 | $10,109 | $2,994 | 30% | $38,267 | $28,388 | $9,879 | 35% | | Sales and marketing | $22,817 | $17,443 | $5,374 | 31% | $65,714 | $51,145 | $14,569 | 28% | | General and administrative | $6,659 | $4,044 | $2,615 | 65% | $17,434 | $10,905 | $6,529 | 60% | | Total operating expenses | $42,579 | $31,596 | $10,983 | 35% | $121,415 | $90,438 | $30,977 | 34% | - Operating expenses increased across all categories, primarily driven by higher personnel-related costs due to increased headcount and, for G&A, additional professional fees associated with being a publicly traded company[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Interest expense decreased significantly by **82%** for the three months and **87%** for the nine months ended October 31, 2021, due to the termination of the term loan and replacement with a lower-rate Credit Facility[156](index=156&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, capital resources, and ability to meet future operating and capital expenditure requirements - The company completed its IPO in July 2021, generating **$214.9 million** in net proceeds, and maintains a Credit Facility for up to **$40.0 million** in debt financing[160](index=160&type=chunk) - As of October 31, 2021, the company had **$207.6 million** in cash, cash equivalents, and short-term investments, but an accumulated deficit of **$328.7 million**[160](index=160&type=chunk) - Management believes existing cash, investments, and the Credit Facility will be sufficient to meet projected operating requirements and capital expenditures for at least the next 12 months, despite expected continued losses and negative cash flows from operations due to growth investments[160](index=160&type=chunk) - Remaining performance obligations were **$124.3 million** as of October 31, 2021, with **$76.7 million** expected to be recognized as revenue over the next 12 months[160](index=160&type=chunk) [Contractual Obligations and Commitments](index=38&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's significant contractual obligations and commitments, including cloud hosting and debt repayment - In July 2021, the company committed to spend an aggregate of at least **$10.0 million** with a cloud hosting service provider between August 2021 and July 2024[167](index=167&type=chunk) - The company repaid **$25.0 million** of outstanding debt under its Credit Facility during the three months ended October 31, 2021[167](index=167&type=chunk) [Indemnification Agreements](index=38&type=section&id=Indemnification%20Agreements) This section describes the company's standard indemnification arrangements for intellectual property and for its directors and officers - The company enters into standard indemnification arrangements in the ordinary course of business, including for intellectual property infringement claims, with generally perpetual terms and undeterminable maximum potential future payments[168](index=168&type=chunk) - Indemnification agreements with directors and officers cover liabilities arising from their status or service, excluding liabilities from willful misconduct[169](index=169&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no significant changes to critical accounting policies and estimates compared to previous disclosures - There have been no significant changes to the company's critical accounting policies and estimates as compared to those described in its Final Prospectus[170](index=170&type=chunk) [Recent Accounting Pronouncements](index=39&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for a discussion of recent accounting pronouncements affecting the company - Refer to Note 2 to the condensed consolidated financial statements for a discussion of recent accounting pronouncements[171](index=171&type=chunk) [JOBS Act Accounting Election](index=39&type=section&id=JOBS%20Act%20Accounting%20Election) This section explains the company's election as an "emerging growth company" to use an extended transition period for new accounting standards - As an "emerging growth company" under the JOBS Act, Couchbase has elected to use the extended transition period for complying with new or revised accounting standards until they apply to private companies[172](index=172&type=chunk) - This election may result in financial statements that are not comparable to companies complying with public company effective dates[172](index=172&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet financing arrangements or relationships with unconsolidated entities - The company did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities during the periods presented and does not currently have any[173](index=173&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Couchbase's exposure to market risks, primarily focusing on interest rate fluctuations and foreign currency exchange rates - The company is exposed to market risks primarily from fluctuations in interest rates and foreign currency exchange rates[175](index=175&type=chunk) [Interest Rate Risk](index=40&type=section&id=Interest%20Rate%20Risk) This section assesses the potential impact of interest rate fluctuations on the company's highly liquid investment portfolio - Cash, cash equivalents (**$141.4 million**), and short-term investments (**$66.2 million**) primarily consist of highly liquid investments in money market funds, commercial paper, and corporate debt securities[176](index=176&type=chunk) - Due to the short-term nature of the investment portfolio, a hypothetical **10%** increase or decrease in interest rates is not expected to have a material effect on the company's results of operations and cash flows[176](index=176&type=chunk) [Foreign Currency Risk](index=40&type=section&id=Foreign%20Currency%20Risk) This section evaluates the company's exposure to foreign currency exchange rate fluctuations and its current hedging strategy - The functional currency of foreign subsidiaries is the U.S. Dollar, with remeasurement adjustments recognized in other income (expense), net[177](index=177&type=chunk) - A hypothetical **10%** change in the relative value of the U.S. Dollar to other currencies would not have a material impact on the company's results of operations and cash flows[177](index=177&type=chunk) - The company has not engaged in hedging foreign currency transactions to date[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting - Management, with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of October 31, 2021, concluding they were effective at the reasonable assurance level[178](index=178&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures at a reasonable assurance level - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q[178](index=178&type=chunk) [Changes in Internal Control Over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the period - There were no changes in internal control over financial reporting identified during the period that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[179](index=179&type=chunk) [Inherent Limitations on Effectiveness of Controls and Procedures](index=41&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This section acknowledges the inherent limitations of control systems, which provide reasonable but not absolute assurance - Management believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance, but not absolute assurance, of achieving their objectives, as no control system can prevent or detect all errors and fraud[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section states that Couchbase is not currently involved in any legal proceedings that would materially harm its business or financial condition - The company is not currently a party to any legal proceedings that, if determined adversely, would have a material and adverse effect on its business, financial condition, or results of operations[183](index=183&type=chunk) - Future litigation may be necessary to defend the company, its partners, and customers, or to establish intellectual property rights, which can be costly, time-consuming, and divert management attention[183](index=183&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This comprehensive section details various risks and uncertainties that could adversely affect Couchbase's business, financial condition, results of operations, and prospects - An investment in Couchbase is speculative and risky due to significant risks and uncertainties that could seriously harm its business, financial condition, results of operations, revenue, and future prospects[184](index=184&type=chunk) - The risk factors are categorized into five main areas: Risks Related to Our Industry and Business, Risks Related to Our Dependence on Third Parties, Risks Related to Our Open Source and Intellectual Property, Risks Related to Our Legal and Regulatory Environment, and Risks Related to Ownership of Our Common Stock and Governance Matters[184](index=184&type=chunk) [Risks Related to Our Industry and Business](index=42&type=section&id=Risks%20Related%20to%20Our%20Industry%20and%20Business) This section outlines risks inherent to the company's industry and business, including net losses, competition, and growth management - The company has a history of net losses (**$45.0 million** for the nine months ended October 31, 2021) and expects to continue incurring losses due to significant investments in platform development, sales, marketing, and operations[185](index=185&type=chunk) - Historical revenue growth (**20%** for the nine months ended October 31, 2021) should not be considered indicative of future performance, and growth rates may fluctuate or decline due to various factors including competition and market demand[186](index=186&type=chunk) - Failure to effectively manage rapid growth in employee headcount (from **437 to 644**), geographic reach, and operations could adversely affect the company's brand, business, and financial results[187](index=187&type=chunk) - The company faces intense competition from established legacy database providers (e.g., Oracle, IBM), NoSQL database offerings (e.g., MongoDB), and cloud infrastructure providers (e.g., Amazon, Microsoft, Google), many of whom have substantial competitive advantages[189](index=189&type=chunk)[190](index=190&type=chunk) - Success depends on cost-effectively acquiring new customers and retaining/expanding existing ones, with risks including sales force effectiveness, customer renewal rates, and the balance between free Community Editions and paid Enterprise Editions[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - The market for the company's products and services is relatively new and evolving, and its future success depends on the continued growth and widespread adoption of this market, particularly for NoSQL database solutions[200](index=200&type=chunk) - Failure to innovate in response to changing customer needs, new technologies (e.g., successful adoption of Couchbase Capella), or other market requirements could harm the business, financial condition, and results of operations[201](index=201&type=chunk)[202](index=202&type=chunk) - The global COVID-19 pandemic has negatively impacted business by delaying digital transformation projects, reducing IT spending, restricting sales operations, and affecting collections, particularly for 'COVID-19 impacted customers'[218](index=218&type=chunk) - Real or perceived errors, failures, or bugs in products, or interruptions/performance problems with technology and infrastructure, could adversely affect growth prospects, business, and financial results, especially given the use of the platform for mission-critical applications[227](index=227&type=chunk)[228](index=228&type=chunk) - International operations and planned continued international expansion subject the company to additional costs and risks, including differing labor regulations, currency fluctuations, and compliance with foreign laws[231](index=231&type=chunk) [Risks Related to Our Dependence on Third Parties](index=52&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section details risks arising from reliance on third-party partners and service providers for critical business functions - Inability to maintain successful relationships with partners (Cloud Service Providers, Independent Software Vendors, Systems Integrators, etc.) could harm the business, as partners may market competitive offerings or fail to effectively sell products[251](index=251&type=chunk) - Reliance on third-party service providers for critical business aspects, including cloud hosting infrastructure, means any disruptions, failures, or increased fees could lead to increased costs and delays in providing products and services[254](index=254&type=chunk) - Certain estimates and information publicly referred to are based on third-party sources, and the company does not independently verify their accuracy or completeness; any inaccuracies could harm reputation and business[255](index=255&type=chunk)[256](index=256&type=chunk) [Risks Related to Our Open Source and Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Our%20Open%20Source%20and%20Intellectual%20Property) This section addresses risks associated with the use of open source software, intellectual property protection, and licensing models - The use of third-party open source software and the availability of core portions of the company's source code on an open source basis could negatively affect its ability to sell products, lead to litigation, and allow third parties to access and use its technology[257](index=257&type=chunk)[258](index=258&type=chunk) - Some open source licenses may require the company to make source code for modifications or derivative works publicly available, potentially reducing competitive advantages[260](index=260&type=chunk) - The company's distribution and licensing model, where products can be obtained for free, could negatively affect its ability to monetize and protect intellectual property rights and detect license violations[263](index=263&type=chunk) - The decision to license source code to Couchbase Server 7.0 under a source-available license (BSL 1.1) may harm its adoption, reduce brand awareness, and negatively impact competitiveness[267](index=267&type=chunk) - The company could incur substantial costs in obtaining, maintaining, protecting, defending, and enforcing its intellectual property rights, and any failure to do so could reduce the value of its software and brand[268](index=268&type=chunk) - The company has been and may in the future become subject to intellectual property disputes, which can be costly to defend, lead to significant liability, require substantial damages, and limit its ability to use certain technologies[272](index=272&type=chunk) [Risks Related to Our Legal and Regulatory Environment](index=63&type=section&id=Risks%20Related%20to%20Our%20Legal%20and%20Regulatory%20Environment) This section covers risks from evolving laws and regulations, data privacy, security breaches, and international tax liabilities - The business is subject to a wide range of evolving federal, state, local, and foreign laws and regulations (e.g., data privacy, security, intellectual property, anti-bribery, export controls), and failure to comply could lead to investigations, fines, and damages[278](index=278&type=chunk) - Security breaches or unauthorized access to company or customer data/software could harm reputation, reduce product use, and lead to claims, litigation, regulatory investigations, and significant liability[281](index=281&type=chunk) - Inability to comply with U.S. and foreign data protection, information security, and privacy laws (e.g., GDPR, "Schrems II" decision, Brexit, CCPA, CPRA, VCDPA, CPA) could result in significant fines, penalties, and operational changes[288](index=288&type=chunk)[289](index=289&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - Any future litigation against the company could be costly and time-consuming to defend, diverting management's attention and resources[300](index=300&type=chunk) - Indemnity provisions in various agreements expose the company to substantial, potentially uncapped, liability for intellectual property infringement and other losses[302](index=302&type=chunk) - Sales to heavily regulated organizations (e.g., governments) present challenges such as high competition, complex compliance requirements, preferential pricing, and increased liability[304](index=304&type=chunk) - Failure to comply with anti-bribery, anti-corruption, anti-money laundering, and similar laws (e.g., FCPA) could subject the company to penalties, fines, and reputational damage[306](index=306&type=chunk) - The company is subject to governmental export control, trade sanctions, and import controls, which could impair its ability to compete in international markets or subject it to liability for violations[310](index=310&type=chunk) - International operations may lead to greater than anticipated tax liabilities due to challenges to transfer pricing policies or changes in tax laws, and the ability to use net operating losses (NOLs) may be limited[313](index=313&type=chunk)[315](index=315&type=chunk)[318](index=318&type=chunk) - Failure to develop and maintain proper and effective internal control over financial reporting could adversely affect investor confidence and the value of common stock, especially as a public company[328](index=328&type=chunk)[331](index=331&type=chunk) [Risks Related to Ownership of Our Common Stock and Governance Matters](index=72&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock%20and%20Governance%20Matters) This section discusses risks related to public company operations, stock price volatility, and corporate governance - Operating as a public company incurs substantial legal, accounting, and other expenses, and requires significant management attention, potentially diverting from day-to-day business oper

Couchbase, Inc. (NASDAQ:BASE) Q3 2022 Earnings Conference Call December 7, 2021 5:00 PM ET Company Participants Matt Cain – President and CEO Edward Parker – Investor Relations Greg Henry – CFO Conference Call Participants Sanjit Singh – Morgan Stanley Matt Hedberg – RBC Capital Markets Ittai Kidron – Oppenheimer Raimo Lenschow – Barclays Jason Ader – William Blair Rob Oliver – Baird Dan Church – Goldman Sachs Operator Thank you for standing by and welcome to Couchbase 's Third Quarter fiscal 2022 earnings ...