chbase(BASE) - 2022 Q4 - Annual Report

Part I Special Note Regarding Forward-Looking Statements 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] - 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][12] Risk Factor Summary 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] - 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] - 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] - 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] - 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] - 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] Business Overview 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] - The database is versatile, supporting cloud, multi-cloud, hybrid-cloud, on-premise, and edge environments, fusing relational database strengths with NoSQL flexibility[16] - Couchbase Capella is a fully-managed Database-as-a-Service (DBaaS) offering, simplifying database management and supporting a broad set of use cases[16] 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] - 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] - Couchbase Capella, their fully-managed DBaaS, simplifies database management and reduces the need for additional databases, facilitating a seamless transition from legacy systems[16] Our Solution 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] - 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] Key Customer Benefits 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] - Flexible: Supports agile development and CI/CD with a flexible JSON data model, allowing schema changes without downtime[19] - Familiar: Utilizes SQL++ query language, extending SQL for JSON, to minimize disruption for SQL-trained DBAs[19] - Future Proof: Designed for multi-cloud to edge deployment, offering Couchbase Capella as a fully-managed DBaaS for simplified operations[19] Our Competitive Strengths 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] - The 'land and expand' model allows easy initial deployment and subsequent expansion to mission-critical applications, making Couchbase a core system of record[20] - 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] - The platform is architected for today and tomorrow, solving major computer science problems to provide high performance, reliability, scalability, and agility[20] - A strong company culture, emphasizing 'Be Valued, Create Value,' is considered a key asset for attracting and retaining top talent[20] Our Growth Strategy 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] - Investments in Couchbase Capella include extending availability to additional cloud service providers and improving the developer experience[22] - Enhance the core platform (Couchbase Server, Couchbase Mobile) to provide agility, flexibility, and performance, eliminating the need for multiple point solutions[22] - Expand within the existing customer base by moving from initial application deployments to mission-critical systems of record[22] - Grow the customer base with new enterprises through a direct 'sell-to' motion targeting architects and a 'buy-from' motion targeting application developers[22] - Invest in growing the ecosystem of ISVs, cloud service providers, systems integrators, and the developer community to increase reach and mindshare[22] Our Products 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] - 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] - 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] Our Technology 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] - 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][34] - 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][36][37] - 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][46][47][48][50] Our Customers 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] - Customers range from cloud-native organizations to those undergoing digital transformation, including small and medium-sized enterprises and Fortune 100 companies[51] Marketing, Sales and Partners 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] - Marketing efforts build brand reputation and generate demand among enterprise architects and application developers through awareness campaigns, digital demand generation, and community engagement[54] - 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][56] - The PartnerEngage program fosters relationships with Cloud Service Providers, Independent Software Vendors, Systems Integrators, and Technology Partners to expand market reach and distribution[59][60] Human Capital Resources 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][63][64] - 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] - The company considers its relations with employees to be good and has not experienced any work stoppages[67] Research and Development 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] - Software development uses iterative releases with small functional teams for agility and efficiency[68] - 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] Intellectual Property 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] - 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] - 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] Compliance with Government Regulation This section directs readers to the 'Risk Factors' for detailed information on governmental regulations and associated business risks 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] - Primary competitors include legacy database providers (Oracle, IBM, Microsoft), NoSQL providers (MongoDB), and cloud infrastructure providers (Amazon, Microsoft, Google)[73] - 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] - Couchbase believes it competes favorably but faces significant risks from increasing competition[74] Corporate Information 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] - The principal executive offices are located at 3250 Olcott Street, Santa Clara, California 95054[75] Available Information 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] - 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] Risk Factors 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 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] 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] - 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][88] - 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] - 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] - 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][132] Risks Related to Our Dependence on Third Parties 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][163] - 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][167] - 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] Risks Related to Our Open Source and Intellectual Property 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] - 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][173] - 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] - The decision to license certain source code under BSL 1.1 (not an open source license) may harm adoption and reduce brand awareness[178] - 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][180][183][184] - Intellectual property disputes are costly, time-consuming, and could result in significant liability, damages, or limitations on the ability to use certain technologies[185][188][189] Risks Related to Our Legal and Regulatory Environment 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][193] - 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][196][199] - 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][205][207][210][211][212] - 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][223] - 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][227] - Governmental export control, trade sanctions, and import controls could impair international competitiveness or lead to liability for violations[229][230][231] - 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][233][237][239] - 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][246] Risks Related to Ownership of Our Common Stock and Governance Matters 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][255] - 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][258] - 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] - 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][263][265] - 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] - Future issuances of additional stock for financings, acquisitions, or equity compensation plans will dilute existing stockholders[267] - 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][270] - The company does not intend to pay dividends for the foreseeable future, requiring stockholders to rely on stock price appreciation for returns[275] Unresolved Staff Comments This item confirms the absence of unresolved staff comments from the SEC Properties 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] - Additional leased facilities are located in Austin, Texas (U.S.), and Tel Aviv, Israel, Bangalore, India, and London and Manchester, United Kingdom (international)[276] - All facilities are leased, and the company plans to expand, anticipating additional expenses for new or expanded spaces[276] Legal Proceedings 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] - Legal fees and costs are expensed as incurred, and liabilities are recorded when a loss is probable and reasonably estimable[277] - 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] Mine Safety Disclosures This item is not applicable to Couchbase Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - As of January 31, 2022, there were approximately 210 holders of record of common stock[281] - 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] - No equity securities were sold unregistered, and no issuer purchases of equity securities occurred during the three months ended January 31, 2022[283][284] - 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] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][292] - The platform combines relational database strengths with NoSQL flexibility, catering to enterprise architects and application developers[292] 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] Our Business Model 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] - 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] - Couchbase Capella is licensed via an on-demand consumption model or an annual credit model, offering flexibility and volume discounts[298] - 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] - 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][302] - 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] Impact of COVID-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] - Customers in COVID-19 impacted industries (travel, hospitality, retail) reduced or failed to expand platform usage[306] - 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] - Cost savings were realized from reduced business travel, deferred hiring, and virtualized events[309] - Signs of recovery include increased spending from COVID-19 impacted customers and improved sales productivity, with expectations for accelerated growth[310] Factors Affecting Our Performance 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] - Expansion within existing customers is a significant growth driver, achieved through increased deployment scale and new use cases, supported by professional services[312] - Dollar-based net retention rate has been over 115% in seven of the past eight quarters, indicating successful expansion within existing customers[312] - Continuous investment in offerings, personnel, geographic presence, and infrastructure is essential for future growth and innovation[314] Key Business Metrics 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][317] 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] Non-GAAP Financial Measures 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 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] - License revenue is recognized upon transfer of software access, while PCS and services revenue are recognized ratably over the term or over time[330] - Cost of subscription revenue includes personnel, software, cloud infrastructure, and amortization of capitalized internal-use software related to Couchbase Capella[332] - Cost of services revenue includes personnel, third-party partners, and travel expenses[333] - 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][336][337][338] - Interest expense, other income/expense (net), and provision for income taxes also affect the results of operations[339][340][341] Results of Operations (Comparison of Fiscal 2022 and Fiscal 2021) 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] - 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] - 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][352] - Research and development expenses increased by $12.6 million (32%), driven by higher personnel-related costs due to increased headcount[353] - Sales and marketing expenses increased by $19.1 million (27%), primarily due to increased personnel-related costs and marketing program expenses[356] - 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] - 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] - Other income (expense), net decreased by $1.4 million (127%) due to an increase in net foreign currency transaction losses[359] Liquidity and Capital Resources 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] - 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] - Despite historical net losses and negative operating cash flows, current liquidity is believed sufficient for the next 12 months[362] - 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] Cash Flows 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] - Cash used in investing activities for FY2022 was $92.0 million, primarily from net purchases of short-term investments ($91.2M)[368] - 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] Contractual Obligations and Commitments 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] Indemnification Agreements 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] - Directors and officers are also indemnified against certain liabilities[371] - 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] Critical Accounting Policies and Estimates 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] - Revenue recognition involves significant judgment in determining distinct performance obligations (software license and PCS) and allocating transaction price based on relative SSP[376][377] - 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][379][380] - Couchbase elected the extended transition period under the JOBS Act for new accounting standards[382] Quantitative and Qualitative Disclosures About Market Risk 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] - 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][385] - 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] - Couchbase has not engaged in foreign currency hedging transactions to date[386] Financial Statements and Supplementary Data 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 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] - The financial statements are presented fairly, in all material respects, in conformity with U.S. GAAP[391] Consolidated Balance Sheets 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] - 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] - 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] Consolidated Statements of Operations 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] - Net loss increased from $39.9 million in FY2021 to $58.2 million in FY2022[401] - Operating expenses increased significantly, with R&D up 32% and Sales & Marketing up 27% from FY2021 to FY2022[353][356] - Interest expense decreased by 91% from FY2021 to FY2022[358] Consolidated Statements of Comprehensive Loss 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