chbase(US:BASE)2023-12-06 16:00Part I. Financial Information Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for the period ended October 31, 2023, reflect a decrease in total assets to $232.0 million and a net loss of $58.8 million for the nine-month period, with improved operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2023 | Jan 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $46,907 | $40,446 | | Short-term investments | $109,719 | $127,856 | | Total current assets | $207,444 | $229,479 | | Total assets | $231,989 | $253,039 | | Liabilities & Equity | | | | Deferred revenue, current | $71,529 | $71,716 | | Total current liabilities | $90,204 | $94,957 | | Total liabilities | $96,721 | $102,775 | | Total stockholders' equity | $135,268 | $150,264 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | Nine Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $45,813 | $38,557 | $129,948 | $113,201 | | Gross profit | $40,702 | $33,682 | $113,006 | $98,894 | | Loss from operations | $(17,542) | $(16,592) | $(61,944) | $(50,813) | | Net loss | $(16,255) | $(16,677) | $(58,781) | $(51,880) | | Net loss per share | $(0.34) | $(0.37) | $(1.26) | $(1.16) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,443) | $(30,982) | | Net cash provided by (used in) investing activities | $18,093 | $(33,587) | | Net cash provided by financing activities | $9,353 | $8,517 | | Net increase (decrease) in cash | $6,461 | $(56,907) | - As of October 31, 2023, the company's Remaining Performance Obligations (RPOs) were $164.4 million, with $111.8 million expected to be recognized as revenue over the next twelve months79 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports continued revenue growth to $129.9 million for the nine months ended October 31, 2023, with ARR growing 24% to $188.7 million, despite a net loss of $58.8 million and macroeconomic headwinds Key Business Metrics | Metric | As of Oct 31, 2023 | As of Oct 31, 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Annual Recurring Revenue (ARR) | $188.7 million | $151.7 million | 24% | | Customers | 715 | 658 | 9% | - The company's dollar-based net retention rate has remained over 115% for the past eight quarters, indicating successful expansion within the existing customer base132 - Macroeconomic conditions, including recessionary fears and inflation, are impacting the business, leading to longer deal cycles, extra layers of scrutiny and approval, and customers opting for smaller initial purchases130 Non-GAAP Operating Loss Reconciliation (in thousands) | Metric | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | | :--- | :--- | :--- | | Loss from operations (GAAP) | $(17,542) | $(16,592) | | Stock-based compensation expense | $11,755 | $6,753 | | Employer taxes on employee stock transactions | $757 | $210 | | Restructuring | $— | $— | | Non-GAAP operating loss | $(5,030) | $(9,629) | Results of Operations For the third quarter ended October 31, 2023, total revenue increased 19% to $45.8 million, primarily from subscription growth, while operating expenses rose 16%, leading to a slight widening of the loss from operations Revenue Breakdown (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription | $43,997 | $35,720 | $8,277 | 23% | | Services | $1,816 | $2,837 | $(1,021) | (36)% | | Total Revenue | $45,813 | $38,557 | $7,256 | 19% | Operating Expenses Breakdown (in thousands) | Expense Category | Q3 2023 | Q3 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $15,903 | $13,998 | $1,905 | 14% | | Sales and marketing | $31,602 | $27,448 | $4,154 | 15% | | General and administrative | $10,739 | $8,828 | $1,911 | 22% | | Total Operating Expenses | $58,244 | $50,274 | $7,970 | 16% | - The increase in subscription revenue for Q3 2023 was primarily driven by existing customers, which accounted for approximately 89% of the growth173 - Cost of subscription revenue increased by 35% in Q3 2023, mainly due to higher computing infrastructure costs for Couchbase Capella and increased personnel-related costs174 Liquidity and Capital Resources As of October 31, 2023, the company held $156.6 million in cash and investments, deemed sufficient for future operations, with net cash used in operating activities improving to $20.4 million for the nine-month period - The company held $156.6 million in cash, cash equivalents, and short-term investments as of October 31, 2023186 - Net cash used in operating activities improved to $20.4 million for the nine months ended Oct 31, 2023, compared to $31.0 million for the same period in 2022188189 - On June 5, 2023, the company terminated its Credit Facility with Silicon Valley Bank, with no borrowings outstanding at the time of termination84186 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate and foreign currency fluctuations, but due to the short-term nature of its $156.6 million investment portfolio, a 10% change in rates is not expected to have a material effect - The company's primary market risk exposures are interest rate risk on its investment portfolio and foreign currency risk from international operations199 - Due to the short-term nature of its investment portfolio, management does not believe a 10% change in interest rates would materially affect results of operations or cash flows200 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of October 31, 2023, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures were effective at the reasonable assurance level202 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls203 Part II. Other Information Legal Proceedings The company is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business, financial condition, or results of operations - The company reports it is not currently a party to any legal proceedings that would have a material and adverse effect on its business206 Risk Factors The company outlines significant risks including a history of net losses, intense competition, challenges in customer acquisition and expansion, macroeconomic downturns, and the complexities of complying with international laws and data privacy regulations - The company has a history of net losses, incurring a net loss of $58.8 million for the nine months ended October 31, 2023, with an accumulated deficit of $469.3 million, and may not achieve profitability in the future208 - The company faces intense competition from established legacy database providers (Oracle, IBM, Microsoft), NoSQL providers (MongoDB), and major cloud infrastructure providers (Amazon, Microsoft, Google)212 - The business is subject to risks from macroeconomic downturns, which could lengthen sales cycles, cause customers to reduce spending, and delay projects231 - Security breaches of the company's or its service providers' systems could lead to significant liability, reputational damage, and loss of customer confidence, with risks heightened by the use of third-party cloud hosting and remote work268 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period and confirmed no material change in the intended use of its July 2021 IPO net proceeds for general corporate purposes - There were no unregistered sales of equity securities in the period312 - There has been no material change in the planned use of net proceeds from the company's IPO, which totaled $214.9 million313 Other Information Several executive officers and a director adopted Rule 10b5-1 trading arrangements in October 2023 for the potential sale of company stock, with plans scheduled until December 31, 2024 - In October 2023, CEO Matt Cain, CFO Greg Henry, and other key executives and a director adopted Rule 10b5-1 trading plans to sell shares of company stock315317