chbase(US:BASE)2024-12-04 21:22Part I Item 1. Financial Statements (unaudited) This section presents Couchbase, Inc.'s unaudited condensed consolidated financial statements for the quarter ended October 31, 2024, along with detailed accounting notes Condensed Consolidated Balance Sheets The balance sheet as of October 31, 2024, shows a decrease in total assets to $222.5 million from $247.8 million at January 31, 2024, primarily driven by a reduction in cash, short-term investments, and accounts receivable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2024 | Jan 31, 2024 | | :--- | :--- | :--- | | Total current assets | $194,301 | $224,286 | | Total assets | $222,459 | $247,752 | | Total current liabilities | $91,174 | $112,506 | | Total liabilities | $95,681 | $117,331 | | Total Stockholders' Equity | $126,778 | $130,421 | Condensed Consolidated Statements of Operations For the three months ended October 31, 2024, total revenue increased to $51.6 million from $45.8 million year-over-year, but a rise in operating expenses led to a higher net loss of $(18.2) million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 FY2025 (ended Oct 31, 2024) | Q3 FY2024 (ended Oct 31, 2023) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $51,628 | $45,813 | +12.7% | | Gross Profit | $45,072 | $40,702 | +10.7% | | Loss from Operations | $(19,234) | $(17,542) | +9.6% | | Net Loss | $(18,152) | $(16,255) | +11.7% | | Net Loss Per Share | $(0.35) | $(0.34) | +2.9% | Condensed Consolidated Statements of Cash Flows For the nine months ended October 31, 2024, net cash used in operating activities slightly improved to $(20.2) million, while net cash provided by investing activities significantly decreased Cash Flow Summary for the Nine Months Ended October 31 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,186) | $(20,443) | | Net cash provided by investing activities | $2,885 | $18,093 | | Net cash provided by financing activities | $8,766 | $9,353 | | Net (decrease) increase in cash | $(8,863) | $6,461 | Notes to Condensed Consolidated Financial Statements The notes provide crucial details supporting the financial statements, including changes in accounting estimates, new credit facilities, and revenue breakdown by geography - The company increased the expected period of benefit for deferred sales commissions from three to four years, effective February 1, 2024, applied prospectively49 - As of October 31, 2024, the company's Remaining Performance Obligations (RPOs) were $211.3 million, with $128.7 million expected to be recognized as revenue over the next 12 months70 - On February 7, 2024, the company entered into a new three-year, $25.0 million senior secured revolving loan facility, with no debt outstanding as of October 31, 20247172 Revenue by Geographic Area (in thousands) | Region | Nine Months Ended Oct 31, 2024 | Nine Months Ended Oct 31, 2023 | YoY Growth | | :--- | :--- | :--- | :--- | | United States | $103,438 | $82,848 | 24.9% | | International | $51,106 | $47,100 | 8.5% | | Total | $154,544 | $129,948 | 18.9% | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, highlighting 19% revenue growth and 17% ARR growth, while continuing to invest in its DBaaS offering amidst macroeconomic headwinds Overview and Business Model Couchbase provides a cloud database platform with a primarily subscription-based business model, employing a dual go-to-market strategy for enterprises and developers - The company's mission is to simplify modern application development and deployment across cloud and edge environments, powering core applications with high performance and reliability102 - The substantial majority of revenue (96% for the nine months ended Oct 31, 2024) comes from subscriptions, with a smaller portion from professional services106 - The go-to-market strategy focuses on a direct sales force for large enterprises and a developer-focused approach with free trials and the Couchbase Capella DBaaS offering to drive adoption108 Key Business Metrics The company's key performance indicators showed strong growth, with Annual Recurring Revenue (ARR) increasing by 17% year-over-year and total customer count growing by 26% Annual Recurring Revenue (ARR) | Date | ARR (in millions) | YoY Growth | | :--- | :--- | :--- | | Oct 31, 2024 | $220.3 | 17% | | Oct 31, 2023 | $188.7 | - | Customer Count | Date | Total Customers | | :--- | :--- | | Oct 31, 2024 | 903 | | Oct 31, 2023 | 715 | - As of October 31, 2024, ARR for the Couchbase Capella DBaaS product was approximately $33.2 million114 Results of Operations Total revenue for Q3 FY2025 grew 13% year-over-year to $51.6 million, driven by subscription revenue, while operating expenses increased across all categories, widening the operating loss - For the three months ended Oct 31, 2024, subscription revenue growth was primarily driven by existing customers, who accounted for approximately 92% of the increase148 - Cost of subscription revenue increased by 37% in Q3 YoY, mainly due to higher computing infrastructure costs for the growing Couchbase Capella service149 - Operating expenses for the nine-month period increased by 13.5% YoY, primarily due to higher personnel-related costs, including stock-based compensation, across R&D, Sales & Marketing, and G&A departments due to headcount growth152155158 Liquidity and Capital Resources As of October 31, 2024, Couchbase had $141.9 million in cash, cash equivalents, and short-term investments, believing its existing capital is sufficient for at least the next 12 months - The company's primary sources of liquidity are cash from operations, proceeds from its July 2021 IPO, and a new credit facility162164 - A substantial source of cash is from customer prepayments for subscriptions, which are recorded as deferred revenue, with remaining performance obligations of $211.3 million as of October 31, 2024164 Cash Flow Summary for Nine Months Ended Oct 31 (in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,186) | $(20,443) | | Free Cash Flow | $(22,831) | $(23,868) | Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate and foreign currency exchange rate risks, but expects no material impact from a hypothetical 10% change due to its short-term investments and U.S. Dollar functional currency - The company's investments are exposed to interest rate fluctuations, but due to their short-term nature, a 10% change in rates is not expected to have a material effect178 - Foreign currency risk exists, but a hypothetical 10% change in the U.S. Dollar's value relative to other currencies is not expected to materially impact results of operations179 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of October 31, 2024, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period182 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls183 Part II. Other Information Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial results - Couchbase is not currently involved in any legal proceedings that are considered material to its business187 Risk Factors This section details significant risks including a history of net losses, intense competition, challenges in customer acquisition, reliance on innovation, security breaches, evolving data privacy regulations, and intellectual property protection Risks Related to Business and Operations The company faces operational risks including a history of net losses, intense competition from established players and cloud providers, and challenges in customer acquisition and expansion due to macroeconomic pressures - The company has a history of net losses, incurring $59.0 million in the nine months ended October 31, 2024, and may not achieve or maintain profitability in the future190 - Competition is intense from legacy database providers (Oracle, IBM), NoSQL providers (MongoDB), and major cloud infrastructure providers (Amazon, Microsoft, Google), many of whom have greater resources and brand recognition194 - Failure to cost-effectively acquire new customers or secure renewals and expansions from existing ones, especially in the current macroeconomic environment causing longer sales cycles and budget scrutiny, could adversely affect business196207 Risks Related to Technology, Security, and Data Privacy Risks include product errors, reliance on third-party infrastructure, potential security breaches leading to liability and reputational damage, and non-compliance with evolving global data privacy laws - Real or perceived errors, failures, or bugs in the company's complex products could result in negative publicity, data loss, and harm to the brand, potentially leading to customer loss211 - Security breaches or unauthorized access to customer data could lead to significant liability, regulatory investigations, and reputational damage, potentially causing customers to reduce or terminate their use of the products257 - The company is subject to numerous evolving U.S. and international data privacy laws like GDPR and CCPA, and failure to comply could result in significant fines and harm to the business260262 Risks Related to Intellectual Property and Open Source The company's open-source model and reliance on third-party software present risks including impact on sales, litigation exposure, competitor access to technology, and costly intellectual property disputes - The use of open-source software and making its own source code available could negatively impact the ability to sell products, lead to litigation, and allow competitors to access its technology241 - The availability of its source code may lower barriers to entry for competitors, who could develop similar products with less investment, potentially leading to price reductions and loss of market share245 - The company may become subject to costly intellectual property disputes and infringement claims, which could result in significant liability, damage payments, and limitations on its ability to use certain technologies249 Other Information This section discloses that several executive officers and a director adopted Rule 10b5-1 trading plans for the pre-arranged sale of company stock during the last fiscal quarter - Several key executives and a director have adopted Rule 10b5-1 trading arrangements for the future sale of company stock, including: - Matt Cain (CEO) - Greg Henry (CFO) - Margaret Chow (SVP, Chief Legal Officer) - Huw Owen (SVP, Chief Revenue Officer) - Lynn Christensen (Director)306